Frequently Asked Questions

Resources to help you with accounting, tax and building your business


Here are a few of the questions we’re asked on a regular basis. If there’s anything else you’d like to know please feel free to get in touch below.
Read About:
Pricing
Accounting Systems
Tax & IRD
Bookkeeping
Business Growth
FAQs for Contractors
FAQs for Rental Properties

Pricing

Answer: Here at iif Chartered Accountants we like to be upfront with our pricing, and we won’t undertake any work the client’s agreed on the price. If we think there is more work to be done down the road, we will reassess and come to an agreement on whether you’d like us to undertake the work. If the work is more tailored to a specific situation and we cannot quote for it accurately, we will recommend we do the work on a time/cost basis and update you regularly with how things are tracking.
Answer: Along with our upfront pricing, we can also set up a monthly payment schedule either by direct debit or credit card. This helps clients by easing the pressure on cashflow and allows for some planning around it.

Accounting Systems

Answer: For many people we recommend Xero (we also use it for our business). That said, it’s not for everyone. For some people, MYOB is best. For others, Moneyworks might be the best option.

The same applies for payroll systems. If you’re after bright-and-breezy then Xero Payroll is good. If you need something more ‘heavyweight’ then iPayroll or Smartpayroll is the way to go. If you’re in Hospitality, we nearly always recommend Flexitime.

Answer: Yes, absolutely. We’re Gold partners with Xero, which means we’ve got a large number of customers using Xero. All our staff are also Xero Certified advisors, which means no matter who you’re dealing with, you’ll be in good hands.
Answer: Yes of course! We’ve got a number of customers using MYOB, so we know our way around it. While we might personally prefer Xero, we know it’s not for everyone. We’ll never force you to change systems just to use the one we prefer.

Tax & IRD

Answer: Provisional tax is set up to ease the load of paying your taxes (although at times it doesn’t feel like it). So, instead of having a lump sum due at financial year end, you pay an estimated amount in 2 or 3 instalments throughout the year.

If you had taxes more than $2,500 in the previous financial year, you’ll be required to pay the following year’s taxes on a provisional basis. There are 3 methods that can be used to calculate how much provisional tax you’ll need to pay, and it’s important to be accurate to avoid penalties and interest. We can help work it out for you, and to keep you up to date throughout the year to ensure you’re on the right track.

Answer: The best advice in this situation is to talk to a Chartered Accountant (like us!). Dealing with a tax audit is often a matter of understanding what the IRD is looking for, and helping to show them what they need. The goal is to resolve the audit as painlessly as possible, without it spiralling out of control.
Answer: If you have tax debt, the first step is to be open with the IRD and tell them where you’re at. In the early stages they can be helpful in setting instalment arrangements.

If things have progressed past that, then it’s about negotiating penalty remission, interest and tax remission. This will depend on your circumstances, but may be worth exploring. If you’d like more details, please contact us.

Answer: Before you start out, you need to think (or chat with us) about registering for GST (Good and Services Tax). Under IRD regulation, you need to register for GST if you make excess of $60k in annual sales. Proactivity is key and you must register in the first year you estimate sales will exceed this level.

Your next question may be whether to register on invoice or payments basis; do you calculate your GST when you make a sale/purchase, or when payment is actually received? SMEs generally register for payments basis. There are various reasons for this, but usually it is due to cash flow – payment has actually been received/paid, so you’ll have the cash available at the time. It’s also easier to manage and account for. A hybrid method exists, but it is rare so we won’t elaborate here.

Lastly, you’ll need to choose a return period. We find 2 monthly GST is most manageable for SMEs, which also allows you to look through your accounts regularly. If you’re a really small outfit you may choose 6 monthly, but only if you are diligent in your bookkeeping (as 6 months is a long time between filing). Larger organisations or businesses that have high transaction volume may opt for monthly. This is for ease of keeping on top of things and for cash flow.

 

Bookkeeping

Answer: When you own a business, it’s vital to know your financial standing and accurate record keeping makes this so much easier. A good bookkeeper will keep your records in order, and get things done quickly so when you need to view your position, the information is all ready. It’ll also free up your time for more important (and fun) business activities.

We believe a bookkeeper is definitely worth looking into if keeping your books in order is draining your time and energy, and if you’re looking for up-to-date reporting to help you make important decisions.

Answer: If your records are a mess, don’t panic. We’re sure we’ve seen something similar (worse?) in the past. It’s just a matter of sitting down and methodically working through where you’re at right now, and then going backwards from there. Give us a call and we’ll talk you through it.
Answer: Times have changed in the accounting space, and we think for the better. Gone are the days where you have to have until year end to see what’s happening in your business. If you think recording all your transactions in Excel, keeping receipts and then compiling everything at the end of the month, quarter or financial year sounds inefficient – you’re right.

With cloud-based systems like Xero, you have real-time access to information that can support your business decisions. Your financials can be accessed anywhere you have internet – it’s as simple as logging on. We highly recommend packages like Xero for your accounting/bookkeeping, as it’s relatively easy to use and has so many benefits.

 

Business Growth

Answer: Getting a business up and running is a huge feat, and anyone who has developed a profitable business can pat themselves on the back for getting through to now.

However, once hitting this level, business owners are often left with questions like: “where to now?” and “how do I get to the next level?” Or, as the business rapidly grows, more knowledge is required on cash management and debt, along with margins.

This is where it’s important to understand the fundamentals of business at each stage. Our business coaching and development packages are tailored to you, and what will get you where to need to go.

Answer: This question is critical to your business success. We see countless businesses that run into issues because of a lack of cashflow planning or analysis.

The first step is to develop your budget. Be realistic and use the most workable yet ‘gloomy’ scenarios, and update it frequently. Monthly or quarterly would be best to get a good picture.

Look closely at your cashflow mechanisms. These include bank overdrafts – are they suited to your business, and are they sufficient to cover periods of high expenses or low sales? Are your credit terms with suppliers and payments on large assets as favourable as they can be. Do you hold off paying accounts payable to the last moment? On the debtor side, do you collect promptly or have credit terms in place to incentivise prompt payment?

It is vital to make cashflow an area you’re well in control of, as the wheels can fall off quickly when cashflow management is lacking. Get in touch and we can get you on top of cashflow issues/budgets and forecasts so you can be confident moving forward.

Answer: The first thing to understand is who the business plan is for; what you include in a business plan for outside investors might be different than what you include in a business plan for internal use only.

We often see business plans that are very lengthy. Because they’re so long, they often don’t get referred back to and end up gathering dust. It’s important they’re relevant to you, and how you operate.

At a minimum, we like to see detail around distribution channels, customer segmentation, internal resources, external partners, and margin/break-even analysis.

If you’d like a template, get in touch and we’d be happy to send you one.

Answer: This is mostly an issue of timing or something we call accrual accounting – when you’ve incurred an expense or made a sale, but cash is yet to change hands. The transaction gets accounted for but you don’t have it.

Another example would be on fixed assets, like a computer – you have spent the money, but according to accounting rules, this cash outflow needs to be recorded as an asset on the balance sheet, and expensed over time (depreciation). When this happens, you don’t see the expense right away on your profit and loss statement, but instead over the life of the asset. This leads to a higher profit on paper, but less cash in your hand.

Also, when you have high debtor levels (people owe you money) and cash tied up in stock, your cash balance will be low compared to what is showing as profit.

 

Answer: When your affairs are set up effectively for your situation, you are better positioned to protect yourselves, your families and money.

By structures we mean what business type suits your situation – do you trade as a Company, a Sole Trader or a Partnership? Do you have personal assets that need protection and to be kept independent of any business undertakings? Do you need to consider what a change in these relationships means to your assets, both in the business and personally?

FAQs for Contractors

Answer: While you’ll need to seek specific insurance advice, in general ACC will pay you 80% of your prior earnings if you make a claim, so long as you can prove a loss of earnings. At times this can be difficult to do, especially if your contract is ending.

One option is to look at ACC Cover Plus Extra – with this, you get 100% of the amount you pre-agree with ACC.

Another option is to take out private insurance cover (which we generally recommend). It’s best if your income fluctuates, if it’s not a true indication of actual earnings, or if your business will still generate income while you’re injured.

Please note we’re not insurance advisors and as such you need to seek specific advice before relying on this FAQ. We’re happy to put you in touch with an advisor that we work with closely.

Answer: Yes, you’re entitled to claim any home expense that’s connected to your contracting income.

If you’ve used an office at home for work, then you can claim a portion of your:
– Interest payments on Mortgage, or rent
– Phone and internet
– Insurance
– Repairs and maintenance
– Rates
– Power and gas
– Body corp fees
– And any other expense relating to the home office.

Answer: Yes, you can claim for mileage if you’ve got a record of it (generally this doesn’t include home to work travel).

Alternatively, you can keep a log book for personal and business travel, and can then claim that percentage of all running costs relating to the vehicle (including fuel, insurance, repairs, insurance, warrants and registration).

You need to keep your log book for 90 consecutive days. This log book can then be used for 3 years (so long as your mix of use doesn’t vary by more than 20%).

The logbook should include:
– The start and end date of the log book
– The distance of each business journey
– The date of each journey
– The reason for each journey

Answer: In short, so long as there’s a connection between the expense and the income you’re earning, then the expense can be claimed for tax.

Some things you can claim are:
– Phone
– Subscriptions to business magazines and publications
– Entertainment; for example, if you’re meeting someone to discuss future contracts
– Memberships of professional organisations
– Some insurances
– Conferences
– Travel on work trips

Certain types of expenses are disallowed. Generally these are things which are of a personal or private nature, even if they’re used for business/work. The most common example is work clothes, unless they’re branded with your business name.

FAQs for Rentals

Answer: Yes, depreciation still exists for rental properties. There are just certain elements which can’t be depreciated (like land and the building itself).

Depreciable chattels include carpet, whiteware, curtains, hot water cylinders and more.

Answer: Yes, you can claim the interest paid on the mortgage relating to your rental property.

You can’t, however, claim the interest on your mortgage relating to your family home.

Getting the structure right on the lending determines what debt is allocated to your family home versus your rental property.

Answer: Any spending relating to earning the rental income can be claimed as a tax expense.

Here’s a few:
– Fees or commissions paid to property managers
– Legal fees if under $10,000 (in general)
– Accounting fees
– Insurance
– Rates
– Bank fees
– Office expenses (including home office)
– Phone calls
– Travel to and from the property
– General repairs and maintenance
– Gardening

Answer: GST is not paid on residential rental income. This means you don’t add 15% GST to your rent, and you can’t claim back any GST paid on expenses relating to the property.
Answer: Yes, you can claim a tax deduction for repairs and maintenance (“R&M”).

There is a distinction between what’s considered R&M versus what’s considered Capital Expenditure (“CAPEX”).

In short R&M can be claimed for tax, while CAPEX can’t.

R&M is anything that brings the property back into it’s original condition, without improving it beyond that original condition.

For example, replacing a broken shower head, repainting, or replacing damaged lino would all be considered R&M.

On the other hand, CAPEX is anything that improves the overall condition of the property.

An example of this would be removing a damaged exterior wall and replacing it with a conservatory. The conservatory is an improvement to the property and is therefore CAPEX.

It can be a subtle change in circumstances that changes something from R&M to CAPEX. As such, we always recommend you discuss your situation with us.

Accounting & Tax is only the start

Our bigger aim is to provide you with the support, training and resources to help you build wealth for your family.

As a start, checkout our eBooks:

Checkout our Profit eBook

Getting your hands on your cash, and keeping it for longer.

We’ve put together some great practical tips for managing your cash, getting it quicker and keeping it for longer.

Enter your details to download the eBook:

Checkout our Cashflow eBook

Five ways to increase profit through simple improvements.

Here’s five easy ways to increase your profit today, through simple changes to your business and how you operate.

Enter your details to download the eBook:

What’s next? Get in touch.

Whether you’d like to schedule an appointment, grab a coffee, or ask a quick question about tax or growing a business, we’d love to hear from you.
04 212 4977
hello@iif.co.nz
Level 9, 57 Willis Street, Wellington (access also available from 62 Victoria Street)
PO Box 10690, The Terrace, Wellington 6143

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