Government’s tightening up on property tax

What we are seeing as a result

Property TaxThe media has certainly highlighted issues concerning housing in a wider context for the past while. With the pressures on our housing market in New Zealand in general (the lack of, affordability, overseas investment), the Government has introduced measures to try to reduce property speculation, which they foresee will reduce house prices in general.

What are these measures and how do they affect me? Bright-line test

The bright-line test was introduced on October 1, 2015 so is only in its infancy. Generally speaking (summarised here only) if you buy a house and sell it within two years from October 1, 2015 and it’s not the family home you will be taxed on any gains. Any losses are ‘quarantined’ and aren’t offset against your other income (but they can be used against any current and future bright-line gains).

Can you sell a property after two years without getting taxed?

There is no definitive answer to this question. Property, GST and income tax on property are probably the most complex issues we strike as Chartered Accountants.

Property taxation is often overlooked by people and largely comes down to your intention at the time of purchase. Typically intention at time of purchase is to rent out a property for a long period of time. Tainting: Some tax payers are already considered ‘tainted’ by IRD as due to prior activities they are considered to be a developer or property trader at the time of purchase, so can never get that elusive tax free capital gain that drives a lot of our behaviour.

Urgent IRD numbers

Any property sale now must be transacted between two IRD numbers and registered with LINZ (Land Information New Zealand). If there is no IRD number the sale will not proceed. Lawyers and real estate agents are pretty well informed now, but we are still getting a number of requests for IRD numbers a day or two out from settlement causing some unnecessary last minute dramas.

The future?

We suspect with IRD numbers now being recorded for each transaction, IRD activity will only increase. IRD may write to you, asking for an explanation if you sell a property within two years and a few months. However, time will tell on this as it’s early days. As with any law, there are subtleties that can be applied to various scenarios, so as always, consult your professional team for more specific advice.

Ben Blackler and Blair Smith are very familiar with various ownership structures relating to property and can advise you on the tax implications and how the law will be applied to your specific situation. Call to discuss on 04 555 9090 or email info@bsco.co.nz.

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Inland Revenue – What we’re seeing 2016

  • The introduction of the Bright-line test means if you buy and sell a residential house within two years from 1 October 2015 you probably have to pay income tax on any profit (limited exemptions apply). The IRD now takes a hard line and identifies properties sold within 2 years and asks for details surrounding the transaction. They even have a special form (IR833).
  • Anyone purchasing or selling a house in New Zealand now has to have a NZ bank account and IRD number, and non-residents must provide their tax identification number. This is due in part to NZ anti-money laundering legislation.
  • Last minute panic for IRD numbers – everyone now needs an IRD number to buy or sell a house, but many family trusts that own homes don’t have an IRD number. This can cause last minute panic or delayed settlement as IRD numbers can take up to a week to process.
  •  IRD now have greater knowledge sharing with other organisations such as LINZ and overseas tax identification and pension organisations to identify non-compliance of tax laws.
  • The Budget has provided $29 million of extra funding specifically to assist with ensuring compliance around
    property tax.

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IRD – What we’re seeing

Where’s My Refund? Read on to hear about some of our recent interactions with IRD about your refunds and other things.

• IRD’s ‘standard processing time’ for tax returns is officially up to ten weeks. Before this they do not need to take any actions requested by us. A promptly issued refund one year unfortunately doesn’t guarantee the same the next year.

• We recently had a refund cheque issued on plain, unmarked A4 paper. When questioned, IRD insisted the ‘cheque’ could be banked. Predictably the bank rejected it. We returned the cheque to IRD for a replacement, who then lost it.

Tax refunds are routinely put ‘under review’ without advising us. When we call IRD to follow up we are told that a ‘referral’ needs to be made to get the refund out of review with the referral itself taking 10-15 days!

• An application relating to tax arrears was submitted with very detailed information. The application went ignored and we followed up. IRD then said that the information supplied was out of date, and requested a full update of the supporting information at unnecessary time and cost.

• Where once we were able to have simple issues resolved over the telephone, we are usually told to make a request in writing, which involves extra effort.

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How a modern business embraces technology

How a modern business uses and embraces technology to save time and make more money.

Have you helped your child or grandchild do their school homework lately? Chances are, they have used some form of app like “Mathematics” or “Reading Eggs”. Schools have fully embraced modern technology. Some schools see technology from a budgetary viewpoint, using apps to save stationery/school book resources. But the majority see technology as a relatively low cost alternative which allows the teachers to free up their time to plan better education for their classes, or to just deliver a better experience than the teachers could do without it.

We believe schools have their logic correct. Embrace technology and free up your time. Work smarter, not harder and don’t reinvent the wheel. A lot of Blackler Smith & Co. clients use technology in their business. Most would never look back. It allows them to spend less time on their book work and have more time with their family, or to work on productive client work.

Conversely, we have also had some clients who are put off by the perceived cost of technology and believe their current systems are better, because they don’t have to pay a monthly fee. Let’s hope we can help open your mind to the use of new technology in your business, like we  have for many of our clients.

What would a modern system look like
The majority of businesses are quite simple. They are either selling a product, selling their time, or both. If you are selling products, chances are that a good accounting system with online technology can keep track of what your customers owe you and what your inventory levels are. You could chase up overdue invoices at the click of a button and send out professional looking statements and invoices all via email in a matter of seconds. Manual GST returns are a thing of the past and for a small business a couple of hours a week on accounts is probably plenty.

If you sell time and are a tradie
As a generalisation the worst offenders with paperwork are tradies. They typically have messy records, manual systems, hate invoicing, and each month’s billing (other than the getting paid bit) is just an annoying chore. Imagine having a system where you take your Smartphone on the job with you. It’s already set up with the tools / product lists you use for each job. All that’s missing is the labour charge.

Today, many businesses are setting simple rules for their staff and themselves, such as:
1. Don’t leave a job without opening your app and doing your timesheet. It’s a two minute task. You can then email the invoice on the spot. Even better, get a device that connects to your phone to accept payment on the spot. What could be easier? No more end of month invoicing. Cash flow is much better, time captured and billed is much higher.

2. Ground rules such as eight hours’ worth of entries per day of timesheets are laid down which then just becomes a new habit.

Other benefits
Chartered accountants also love having access to real-time systems. It allows us to see how you did yesterday, rather than seeing how you performed a year after the event. It allows us to become your business advisers rather than your recorders of history.

An efficient system(s) can save hours per month, in which case it pays for itself. Use your extra time to do five more hours of paid work a month. Finding a system(s) that fits your needs is easy. Online tutorials are usually easy to follow and free trial periods apply to most software.

We would almost guarantee that once you have a new system up and running smoothly you will wish you did it years earlier.

To speak to us about assistance with changing how your business uses technology call Blackler Smith & Co. on 04 555 9090 or send us a message.

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Spotlight on Business

February 3 2015 marked the first anniversary for Blackler Smith & Co. an innovative and new chartered accountancy firm based in Margaret Street, Lower Hutt.

While the firm may be relatively new the experience of the principals Ben Blackler and Blair Smith goes back a long way in Lower Hutt and the wider Wellington Region. Both Ben and Blair come from previous careers as principals of the largest accountancy firm in Lower Hutt.

They both act for clients who have been with them for many years. They set up Blackler Smith & Co. when they felt they were at the right stage in their careers to deal with clients in their own distinctive way, with strong professionalism and personal style. It is important to them both they are local with a lot of local knowledge and wide community networks, as Blackler Smith & Co. is a relationship-based business. They are here for the long haul, provide stable relationships and continuity, and plan to look aer their clients for many years to come.

Ben and Blair put a great deal of emphasis on the quality of the service they and their team of experienced accountants provide. Because they have worked locally throughout their careers they understand local businesses and the Wellington market. They particularly enjoy dealing with family owned businesses, whether large or small.

“Dealing with the people who make the decisions and who are affected by those decisions is extremely satisfying” they say. Ben and Blair and their team work hard to achieve the best results for their clients, they are easy to deal with and have a “no surprises” approach to their fee structure.

Having come from a large corporate accounting environment they have longstanding experience dealing with complex trust and commercial work – “it’s what we do”. ey are true business advisers offering strategic advice and direction, and day to day advice on “almost anything business related”. They also offer business valuations and tax compliance services (tax returns, financial statements, returns for GST, PAYE, FBT etc) for companies, trusts, partnerships and individuals. They are progressive and innovative and equipped to solve problems and provide solutions for their clients.

As well as these accountancy services Blackler Smith & Co. has a special division set up to handle tax returns for and provide advice to property investors. is division named The Property Accountants prepares annual financial statements and tax returns at fixed prices to those owning rental properties. is is a specialised area. Their expertise coupled with the fixed price model is ideally suited for those with any number of rental properties, be they residential or commercial/industrial.

Being a person who loves black and white I was immediately impressed by their iconic New Zealand branding. Everything about Blackler Smith & Co. is sharp, new and impressive while still having a strong professional feel.

Their offices, located on Level 1, 8 Margaret Street, Lower Hutt, are modern and extremely family friendly. Ben and Blair both have young families (who all help in the business) and their offices are deliberately designed to accommodate clients who may need to bring children with them when they attend appointments. A room designed with children in mind is decked out especially for their smaller guests. As they both pointed out they don’t want their clients to have any barriers to seeing them when they need to.

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Introducing Blackler Smith & Co.

Blackler Smith & Co began after Ben Blackler and Blair Smith moved out of what became a large international accountancy group. We wanted to help the same types of people and provide the same types of services, but in our own distinct way.

Thank you to everyone that has been in touch with us since we opened in February.We’ve been really humbled and we really appreciate your loyalty.

Our Aims Are Simple, to:
• Focus on people and families who have their own business.
• Get to know our clients really well and have some fun along the way.
• Offer the best advice and focus on your plans and ambitions.
• Offer continuity of people you’re dealing with – we know that constant change is frustrating for you.
• Have great offices that are nice to visit, are easy to find and get a park.
• Be completely professional but have a relaxed, approachable style.

The Won’ts
Here’s what we won’t do:
• We won’t tell you what to do.
• We won’t dictate when to supply your year-end information and we won’t tell you what accounting package you need to use.
• You’re in the driver’s seat with us. We will, however, offer you suggestions to save you time, remove stresses, make you more money and to achieve your potential.
• And we won’t be changing our name.

Our Clients
To highlight the types of work we do, this may be best illustrated by some recent examples:
• We met with an owner seeking to take their business to a whole new level. We first got clarity on their strategy (market positioning, target market, strengths, weaknesses, opportunities and threats) and the functions of their business (responsibility areas). On top of that we bring focus on the business’s monthly results and suggest areas for ongoing improvement.

• We helped three different parties buy their first businesses. We talked through each person’s ambitions, assessed whether they’re onto a good thing by valuing the business and discussing the business’s potential and risks, helped them borrow money from the bank, set up the best ownership structure for the business and supported the transition into the new business.

• For the partners of a business, we met and mapped out a change in a company’s ownership to better protect assets from business and personal risks and saved a lot of tax in the process.

• We helped a number of our clients sell their long established businesses. For two parties this involved talking over what they wanted to achieve, setting a selling price, preparing sales information in a professional way for buyers, assisting with negotiations, reviewing the sale and purchase agreements, working out how to take the money without adverse tax consequences.

• For other clients we’ve been designing better accounting systems (XERO and MYOB) to simplify their administration, to save them time and to get better information, more quickly.

• We provided some specialist family trust advice when things haven’t quite gone as they should have.

• We’ve been involved with many of the all-important annual accounts and tax returns. We usually recommend meetings to talk over the past financial year and more importantly to focus on the future. We find clients get great value from our meetings.

Moving to Blackler Smith & Co
We’ve received a number of questions about the process of changing accountants. Firstly, the harder the decision to move is for you, the more we’d like to talk to you. That’s because we will invest time and energy into establishing our relationship with you. If it’s hard for you to move on from your current accountant, which tells us a lot about the way you like to operate.

Anyway, what’s the process?
• Come and check us out – meet with Ben or Blair
• From there we will contact your current accountant and arrange the transfer of your records (company and trust accounts, minutes, tax returns, etc)
• We cover the cost of the transfer to us. Yes we have some set up time, but again that’s at our sole cost.

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