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Do I really need an accountant?

Do I really need an accountant?

In New Zealand we have a number 8 fencing wire mentality. Why pay someone to do something that you can do yourself…? Often this thinking goes together with truisms such as “She’ll be right, mate”. When it comes to doing tax returns, it can be easy to take the same approach. After all, how hard can it be to add a few numbers together and file a tax return with IRD?
Here are four reasons why you should consider using an accountant.

1. What is your time worth?
Some people will spend hours, or even days, working out how much profit their business has made in order to complete their tax return. Few people, if any, enjoy doing this. Try multiplying the number of hours spent doing your own tax returns by your charge out rate. It is probably more efficient and cheaper hiring an accountant to do this for you.

2. Money – What is a dollar worth?
Accountants specialize in preparing financial accounts and tax returns every day. They have a good idea about what exactly can be claimed. Since the current Income Tax Act came into force in 2008 Parliament has changed it more than 130 times. That’s about ten changes to the Income Tax Act every year. Accountants specialize in this area; keeping current with the ever-changing tax law as it happens. Put simply, accountants know what can be claimed and what cannot. Some of those things might surprise you.

3. Compliance – We don’t know, what we don’t know.
When it comes to the law, ignorance is not a defense. If you make a mistake with your tax return the
penalties can sometimes be harsh. We regularly see clients claiming expenses for things that cannot be claimed, claiming GST when no GST can be claimed and not correctly accounting for “perks” (such as personal use of a “business” car). Some business expenses can be fully claimed, some partially claimed some must be spread out over several years, and some, while still valid, cannot be claimed at all. It is dangerous to think that just because you spent money on a “business” expense, you can claim it all back in your tax return. Accountants specialize in this area. They know what can be claimed and how much.

4. Peace of Mind
As human beings we often find we have a slight nagging feeling in the back of our minds, when doing
things outside our comfort zone. This can be especially true when it comes to dealing with government departments such as IRD. If you use an accountant you will save time, you’ll probably save money, your tax return will certainly comply with the law, but more importantly, you will have peace of mind knowing that someone who specializes in this area is dealing with the IRD on your behalf.

If you have any questions about your business or tax obligations, please contact us for help.

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Law changes for overseas investment in Kiwi businesses

If you are a New Zealand business seeking overseas investment, there are new requirements you’ll need to follow. Find out about the changes and what you need to do.

When: From16 June 2020

What: Changes have been made to rules that impact New Zealand businesses looking for overseas investment. The changes include:

  • a new requirement to notify the Overseas Investment Office (OIO) about overseas investments, and
  • a new national interest test that will apply to some investment transactions.

OIO will need to be notified about all overseas investments that will result in:

  • more than 25% of a New Zealand business or its assets being owned by investors outside of New Zealand, or
  • an increase to an existing holding beyond 50, 70 or to 100%.

A new national interest assessment will apply in rare circumstances to evaluate whether an overseas investment in sensitive and high-risk assets are in New Zealand’s national interests.  

Changes also mean the application process for lower-risk investment transactions is simplified, and some transactions will no longer need consent.

Changes to the Overseas Investment Act (external link) — Overseas Investment Office

Who: New Zealand businesses seeking overseas investment.

Why: Overseas investment can support New Zealand’s COVID-19 economic recovery, so that businesses can continue to grow and evolve, and keep more New Zealanders in jobs. The right checks and balances are needed to protect businesses that are important to New Zealand’s national security, economy, and communities.

What you need to do: If you are seeking overseas investment, be aware of the changes to when the OIO needs to be notified, and that a new national interest assessment might apply to overseas investors wanting to invest in your business.

Businesses seeking investment should get advice from their advisors, for example a lawyer or accountant.

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Paid parental leave is changing

Paid parental leave is extending from 22 to 26 weeks from 1 July 2020. Here’s what you need to know.

When: 1 July 2020

What: Paid parental leave will increase from 22 to 26 weeks. You are already required to provide job-protected parental leave to eligible employees for a minimum of 26 weeks if the employee meets the 6-month employment test (who’ve worked for you for at least an average of 10 hours a week for six months or more). For employees who meet the 12-month employment test (who’ve worked for you for at least an average of 10 hours a week for 12 months or more), the period of parental leave you are required to provide is 52 weeks.

Parental leave

The ‘keeping in touch’ allowance is increasing to 64 hours. These hours allow an employee to work a limited amount of time during the paid parental leave period, without losing their entitlement for payments. This arrangement needs to be agreed to by you and your employee.

Why: To provide increased support for primary carers including working parents with newborns and families taking on the permanent care of children under the age of six.

What you’ll need to do: This change doesn’t require you to provide additional leave. Just be aware that eligible employees who take parental leave will be paid for 26 weeks and can arrange to work up to 64 hours of ‘keeping in touch’ allowance.

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It’s still accounting, but different

Challenges facing businesses lately have been nothing short of dramatic

Accountants may appear to be on the endangered species list in this era of rapidly-increasing automation, but Adam Davy, head of advisory for BDO New Zealand, says accountants just need to think differently and stay relevant if they want to assure demand for their services in the future.

“As Star Trek’s Mr Spock might say… ‘It’s accounting Jim, but not as we know it’,” Davy says.

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