29th September 2017
Early in September, David Seymour, New Zealand’s ACT Party leader urged the country to fix the tax loopholes allowed to commercial businesses run by charitable organisations. Because of their registration as charitable or not-for-profit trusts, these commercial companies have been exempted from paying income tax.
30th August 2017
It has been a rough year so far for Fuji Xerox group. The New Zealand subsidiary of the Japanese multinational firm has been through an accounting irregularities scandal earlier this year. The scandal, triggered by a whistleblower in 2015 according to stuff.com, lead to an investigation, which lasted several months with a shocking result of inappropriate accounting since 2011.
Fujifilm Holdings reported that it found FXNZ conducted some inappropriate accounting from 2011 to 2016 by overstating revenue by about $473 million. The issues caused shareholders to lose their equity at the parent company, worth $230m in New Zealand and $121m in Australia.
16th June 2017
Inland Revenue’s (IR) restructuring could have implications for audits, enquiries, investigations and reviews in the future. IR announced a year ago plans to cut 1500 employees from its workforce in an attempt to modernise and streamline its own efforts. The period of restructuring has been planned to begin in the months following necessary staff consultations, which have now begun.
10th March 2017
Growth in New Zealand’s economy has been experiencing a slowdown in recent months, with Statistics New Zealand reporting a 0.4% rate of growth in the fourth quarter of 2016. That number is lower than previous predictions of 0.7% growth for the same period, and represents the country’s slowest rate of economic growth since the start of 2015.
5th April 2017
Finance Minister Steven Joyce and Revenue Minister Judith Collins, when calling for a crackdown on multinational companies that avoid tax obligations in New Zealand, estimated that the country was losing $300 million per year in uncollected taxes. That number was based on a review of surveys, tax returns and investigations compiled by Inland Revenue, related to companies operating within New Zealand.
23rd February 2017
Whatever New Zealand’s weather may bring from one day to the next, the forecast is indeed sunny for the economy as a whole. Proposed rule changes on tax collection, together with necessary adjustments to compensate for a slight decrease in overseas demand due to China’s economic slowdown, are a few areas to watch in an overall sunny outlook for New Zealand’s economic future.
25th January 2017
The world looked very different a year ago. The UK was holding together well, having escaped (albeit narrowly) a Scottish referendum proposing its own independence. The US seemed certain to settle into a Hillary Clinton presidency, despite blips on the radar coming from Bernie Sanders as well as a particularly unconventional challenger in the Republican Party. Europe was managing internal discontent from the cries of southern nations like Greece and Spain, as well as the strain from Middle Eastern immigrants and refugees.
The TPP, TTIP and TiSA seemed to be likely bets, at last standardising trade relations between the major powers in addition to several rising economies. As with the other issues mentioned above, the cracks were papered over and soon the world’s attention moved away. Elsewhere, several Middle Eastern hotspots were in conflict (as they remain today), but Western nations had largely withdrawn and seemed unlikely to return. Times weren’t perfect, but to many people they seemed well within the bounds of what is normal and manageable.
Since then, it has been a rather interesting 12 months. Ballot victories for Brexit and Trump have fractured longstanding international relationships, and are likely to kill off some or all of the abovementioned trade agreements. The political futures of the US, UK, and other countries like France (where the economically protectionist right-wing National Front Party, headed by Marine Le Pen, leads preliminary polling for April’s election), have exacerbated rifts within institutions such as the EU – creating sore spots that groups like ISIS have sought to further inflame.
Change can bring difficult times, but it can also bring opportunity. Particularly in an environment with no clear modern precedent, it is worth paying close attention to every utterance about trade deals (Prime Minister Bill English, for example, has vowed to press forward with Trans-Pacific Partnership negotiations even though US President Trump has already turned his back on it), new national policies and international alliances, as well as what seems to have been entirely left out of too many planning sessions around the world lately: Public opinion.
Whether the future brings a version of the TPP or the RCEP (Regional Comprehensive Economic Partnership) is yet to be determined, but the former trade agreement includes the US and 4 other countries in the Americas, while the latter excludes those but includes India, China and South Korea. Perhaps no deal will fill the void, and it is even conceivable that the next large-scale political disruption in Europe will break apart the Eurozone entirely.
Whatever the case, the ripple effects from recent earthquakes will continue to be felt in New Zealand, as the nature of trade relationships abroad will dictate the environment in which the country will produce goods for itself, as well as import and export other goods.
A company’s entire business strategy can (and often should) change depending on whether it has a comparative advantage in the Eurozone or in China – or whether its competitors from those areas will have a competitive advantage over it in New Zealand. These are the types of economic conditions that are still very much up in the air, and since they are as yet undetermined, national and business leaders may be open to certain amounts of persuasion by those who present their message well.
13th December 2016
Finance Minister Bill English was sworn in as New Zealand’s 39th Prime Minister on 12 December, 2016. English found his way to the highest office in the land after his party, the majority National Party, voted him in at a special Caucus meeting.
English’s appointment came on the heels of John Key’s announcement that he intended on stepping down as prime minister. The decision, made just a week before English’s selection, came as a shock as Key was enjoying the height of his popularity.
In his final address to Parliament as Prime Minister Mr Key said that he enjoyed the attention but was looking forward to stepping away from the limelight.
I think I’ve fed off the public energy, the enthusiasm that’s often been displayed towards me, he said.
And I think truthfully I’m the kind of person that likes to be liked and most people are, but I’m particularly of that sort of nature so it’s suited me, he continued.
Mr English vowed to continue developing Mr Key’s legacy. He said he would seek to build on the international recognition earned by John Key for New Zealand’s increasingly distinctive place in the global community as a successful economy open to trade, open to investment, and immigration.
Many expected the appointment to go to English who turned out to be the only candidate for the job. English announced Social Housing Minister Paula Bennett as his deputy prime minister while minister of economic development, Steven Joyce, would replace him as finance minister. More cabinet changes are expected in the next few weeks.
As finance minister, English, 54, moved to privatise numerous state-owned energy companies along with Air New Zealand. He cut personal and corporate tax rates whist increasing the goods and services tax. In 2013 English voted against a same-sex marriage bill that eventually passed. As prime minister, English stated that he thought differently about the issue now and did not see gay marriage as a threat to anyone else’s marriage. He has also said that he would not pursue his own agenda as prime minister.
In 2003 Mr English oversaw a landslide defeat for the National Party at the hands of the Labour Party. He now is in charge of a robust New Zealand economy which Moody’s recently said it expected to remain one of the fastest growing of the triple-A economies.
23rd November 2016
Auckland’s new mayor Phil Goff has suggested a $5 bed tax on each night a traveller stays at a hotel in Auckland. The aim is to keep rate rises to last year’s 2.5% and the levy could raise $30 million in revenue to be applied to tourism advertising and building attractions for tourists. The city council will decide next year.
Mr Goff, just two months after being elected, stated that ratepayer funding, the city’s old system of attracting travellers and providing financial support for major events, was not sustainable as the ratepayers had bore the burden of the city’s growth for too long.
Hotels, guesthouses, hostels, and other accommodation providers can expect their rates to rise, but can easily recover costs through the levy, the mayor said. He added that providers will see the benefits of the tax without paying the levy.
The onus of the levy will fall squarely on the visitor. According to the mayor, a traveller spending a night at a four or five-star hotel in Auckland paying between $280 and $380 will have to pay an additional $6 to $10.
The proposal shares the responsibility the ratepayers once had to worry about themselves by spreading it more fairly across all of those who benefit from living and doing business in Auckland, the mayor said. If passed the proposal would allow Goff’s Auckland Council living wage for more than 3,000 city and council employees promise to pick up steam. The higher wages would cost $9 million annually and would be phased in over a number of years. An additional contribution of $500,000 could also be made to support programs for Auckland’s homeless. These two measures are set to be considered, along with the bed tax, in the council next year.
However, the bed tax would present the biggest change in Mr Goff’s first budget as mayor. He had hoped the government would sign off on a regional fuel tax, but it looks unlikely to happen.
Prime Minister John Key said all of New Zealand should consider the levy as much of the country suffers from similar problems Auckland does. According to Mr Key, he expected a report from a working group that was doing research on the cost of tourism infrastructure.
The prime minister said that if Auckland was going to do something in terms of ‘that sort of mechanism,’ then it should be done nationally and not only locally. Auckland may have some tourism issues, given so many people flow into Auckland, but the reality is so does Queenstown, so does Taupo, so does the rest of the North Island, the prime minister said.
16th September 2016
A recent survey conducted by the New Zealand Herald revealed that a whopping 75% of Kiwi business leaders believe the world’s largest multi-nationals—Google, Apple, and Facebook, for example—don’t pay an adequate amount of tax globally. Roughly two-thirds of the same executives surveyed think these companies’ tax avoidance could have negative effects on the New Zealand tax system while a meagre 16% said they believed the government is doing enough to thwart the issue.
The survey comes on the heels of the European Union (EU) concluding that Apple funnelled its international revenues through a loophole in Ireland. The EU imposed a NZ$20 billion retrospective tax bill on Apple and sent alarms through several other countries where the popular American electronics maker does business, including New Zealand. The action also was an indication of the tax strategies of large multi-national business. When all is said and done, Apple could owe Ireland up to about NZ$30.7 billion in back taxes and interest.
An inquest by the same newspaper in March into tax evasion of offshore companies with subsidiaries in New Zealand revealed that 20 multi-national corporations with a combined revenue of around NZ$10 billion paid less than NZ$2 million in corporate income tax. The investigation looked at over 100 multi-national corporations.
Internationally New Zealand sits slightly behind the curve in implementing multi-national tax reform. Just a few months ago, Australia began cracking down on multi-national profit-shifting meaning the companies were actively searching and transferring revenue to tax havens within the country known as ‘lower tax jurisdictions’. The country has implemented a ‘Google tax’ on all shifted profit in response. In 2015, the Australian Tax Office (ATO) received an additional A$1 billion in tax revenue by aggressively going after companies suspected of profit-shifting on a large scale. There were 30 companies in all ranging from the pharmaceutical, energy, and technology industries. The United Kingdom (UK) requires all large corporations to publicly disclose their comprehensive tax strategies.
It should be noted, the executives pointed out, that public outrage over this issue was not entirely founded and that while the unlawful tax practices of a few ‘bad apples’ understandably put a bad taste in the public’s mouth, they are not indicative of how all multi-nationals conduct business. Some experts believe that the notion of overarching distrust New Zealand society has that the wealthy don’t pay their fair share isn’t at all accurate.
Accountancy Insurance is the go-to place for quality and peace of mind when looking for tax audit protection.
5th July 2016
On 23rd June, 2016 the citizens of the United Kingdom (UK) voted to exit the European Union (EU). What is now commonly referred to as ‘Brexit’ sent reverberations through the entire world leaving many with questions as to how this monumental decision would affect economies and political structures throughout the land. Still today, questions linger about how things will play out for the United Kingdom (UK), the European Union (EU), and their respective and collective trade partners.
With Brexit affecting nearly every global economy perhaps no other countries will feel the second-hand effects than the Commonwealth countries, including New Zealand. While the short-term effects have thankfully been limited, the outlook further down the road is considerably foggier. Here are some of the ways Brexit may impact the Kiwi economy.
Although much is unclear now, not even two months since the vote, it’s certain that the vote resulting in the UK’s European Union departure will ripple to every corner of the world. One of the immediate effects of Brexit, as predicted, was the fall of the value of the pound along with the UK markets. The pound reached about a 40 year low prompting the Bank of England to intervene in an effort to stem the tide. This brought on a drop in investor confidence and large withdrawals of money. Another negative for the UK’s exit is that although Britons will ostensibly get to choose what’s best for their country without interference from the European Union, they must now renegotiate and rewrite all of their trade agreements and contracts with trade partner countries. Not only that, but the UK will inevitably trade with some EU countries again, meaning that some of the autonomy they’ve won through Brexit will be lost in the trade negotiations.
Although Britain and New Zealand are on opposite sides of the earth, the two economies have a strong and historic bond. Take for instance the livestock—mainly beef and lamb—the UK receives via export from New Zealand. Previously, these exports were subject to EU rules and regulations, but now, Britain must regulate the goods they import themselves. This could lead to complications in getting New Zealand beef and lamb into the supermarket. Another impact Brexit is having in New Zealand is the rise of the dollar to the pound. As mentioned above, the pound took a serious hit after Brexit as confidence fell and uncertainty set in. The rising dollar hasn’t helped Kiwi exports and the volatility in the markets could make the dollar more expensive to buy, discouraging investors and tourists alike. This may allow banks to charge higher interest rates on loans as the cost of dealing in dollars increases. With the dollar on the rise, look for cheap UK tour packages to start popping up here and there as more and more Kiwis take that dream UK vacation.
21st June 2016
Here at Accountancy Insurance our main task as the industry leader in providing sound, comprehensive coverage for individuals and businesses facing an audit is to do just that. Beyond that we feel it is important to keep our clients updated on the latest news and trends happening in the world of accounting. We strive to present current events affecting tax and accounting in New Zealand as a way to make a confident, more-informed client.
On May 03, 2016, New Zealand’s Minister of Revenue Michael Woodhouse introduced a new tax bill in parliament. The bill, entitled Taxation (Annual Rates for 2016-17, Closely Held Companies and Remedial Matters) Bill aims to change some of the more technical aspects of New Zealand’s tax system. The bill currently sits in parliament where it awaits review and consideration of a Parliamentary Select Committee. Here are a few of the new changes the bill introduces.
One of the changes the bill proposes are reforms to the taxation of closely held companies. At present, the Look-Through Company (LTC) rule structure allows a business to operate as a company, but when it comes to tax matters, the business is ‘looked-through’ and the owner or owners are taxed as individuals. The bill would put restrictions on who can operate as a look-through owner, adjust the calculations needed on converting to a look-though, and limit the amount of foreign capital a look-through company with half or more foreign ownership can derive whilst keeping their look-through status.
The bill would also introduce strict changes to the definition of an associated person in an effort to catch those who plan on evading tax payment of non-resident withholding tax (NRWT). Under the new regulations the borrower and lender would be associated when a joint venture or private equity structure controls the New Zealand based borrower, a third party foreign lender is used as a lending intermediary, or an off-shore part of a New Zealand company borrows money and lends it to the company based in New Zealand.
Another proposed change would expand the non-resident withholding tax (NRWT) to cover non-resident financial arrangement income (NRFAI). Currently a borrower can claim an interest deduction upfront while any NRWT responsibility might not come until later. Inland Revenue thinks this makes the possibility of avoidance higher. Under the new rules, NRFAI rules would also include NRWT and the corresponding interest expense would be deductible to the party borrowing in New Zealand.
The bill would also suggest changes affecting New Zealand’s income tax law, aircraft overhaul expenses, and loss grouping and imputation credits. The bill will undergo an assiduous, line-by-line examination and analysis. Taxpayers are urged to research the bill and submit enquiries to the Select Committee about anything pertaining to its measures. If passed, the bill’s new rules will come into effect beginning 1 April 2017.
16th April 2016
With the previous year’s tax reports nearly due, and a fresh tax year just begun, specifically what should you be looking for on your clients’ behalf?
First on the list is to check for any changes that have taken place to income or assets recently, and how those changes might affect tax reports. Next is to determine whether there are any deductions, write-offs and rebates, including the potential advantages of writing off worthless stock and equipment. A comprehensive review of all relevant documents is a necessary step in this process, made easier by the capabilities of sharing files online. Encourage your clients to try this method (and to save a backup!)
As tempting and useful as it is to look forward and plan ahead, it’s also vital to take special care in the present moment, as tax reports are being prepared. Advances in computing and data analytics have certainly been good for business and our general quality of life, but they also make it easier for Inland Revenue to detect anomalies and other unexpected changes from year to year over filed tax returns. And any decision to investigate those perceived discrepancies can lead to spiraling additional costs, which can throw future plans into jeopardy.
Fortunately there’s Audit Shield, used by accountants in New Zealand and overseas, as a unique insurance in case the government does decide to comb through the financial documents of an individual or a business. Whoever is chosen for financial scrutiny by the government, their accountants typically need to spend many costly extra hours organising and preparing all manner of documents to meet the demands of the audit or investigation.
That time and effort translates into a great monetary expense, but if the client is covered by Audit Shield, we at Accountancy Insurance are the ones who foot the bill. That layer of protection between the government on one hand, and accountants as well as taxpaying citizens and companies on the other, makes a world of difference in terms of planning safely for the future, and also the peace of mind that comes with knowing that accountants and clients can carry on with their daily tasks without having to fear the unwelcome surprise of a government audit.
12th February 2016
At Accountancy Insurance, our business model focuses on reducing our client accounting firms’ exposure to risk by covering their financial costs in the event of audit activity. The appeal of such protection, along with the peace of mind it brings, is why over 2500 accounting firms worldwide are choosing Audit Shield to keep themselves and their clients protected from potentially spiraling financial costs.
Our work starts with Audit Shield, an innovative form of insurance that protects accounting firms and their clients from the professional costs that ensue when Inland Revenue starts to take a special interest in their lodged financial returns. An audit, investigation, enquiry or review from Inland Revenue can require an accountant to submit painstakingly thorough returns and documentation for the government’s scrutiny. Follow-up reports and interviews can be needed, and the stakes are high enough to require slow, careful work – and often additional study of the intricacies of tax law.
Most of these requirements will not be cheap for individuals or businesses working with a professional accountant. Every extra hour should be billed, although more often than not, it isn’t always easy for professional accountants to recoup their costs, regardless of whether of any wrongdoing in the lodgment. Until Audit Shield, this uncertainty was simply a risk that accountants and their clients had to absorb as part of their financial reality – but not any longer.
That’s where Audit Shield comes in. Those who opt in to Audit Shield are protected against any additional costs levied by professional accountants or experts, in the event that a relevant government authority makes additional financial work necessary by instigating an official audit, investigation, enquiry or review during the period that Audit Shield has been activated. To date, over $1.4 million has been successfully paid out to claimants in New Zealand, and interest in Accountancy Insurance’s services is higher than ever.
It turns out that freedom from unexpected surprises is worth almost as much to clients as properly organised lodged returns. It’s this well-earned reputation for dependability that is Accountancy Insurance’s biggest asset, and our aim is to position ourselves even further as the insurance company that accounting firms worldwide can count on.
When we say we’ve got you covered, we mean it. Because no one should have to fear an audit and the subsequent costs associated with it.
6th September 2016
Our perceptions can deceive us. Some accountants believe that if they are efficient, they do not need tax audit insurance. Their perception is far from reality as audit activity is not purely linked to the quality of an accountant’s work.
The common misconception is heard regularly by the team at Accountancy Insurance. However, the proof really is in the pudding. Claims for New Zealand Audit Shield (tax audit insurance) client accounting firms have increased by nearly 30% in the past 12 months. A substantial number of the lodged returns under scrutiny do not actually require further adjustments to be made.
The reality is that Inland Revenue has invested significant resources into the transformation of their current system, which is officially launching in 2017. The subsequent advancements in technology are bound to result in a wider reach and further scrutiny of lodged returns.
If a business or salary/wage earner has been selected for scrutiny, despite whether the return was lodged correctly and no further adjustments are required, subsequent professional fees are likely to be incurred as a result. As an accountant, you can either absorb these fees or pass the cost of the professional fees onto your client. Either option is not ideal. With Audit Shield the professional fees associated with the instigation are covered.
In excess of 180,000 clients of accountants are currently participating in Audit Shield, and more than 2500 accounting firms in New Zealand, Australia and Canada offer the tax audit insurance solution to their clients. More than $1,000,000* in claim payments for professional fees is processed per month by Accountancy Insurance.
*Figures are based on an average monthly total from Accountancy Insurance’s claims data since June 2015 of client accounting firms in New Zealand and Australia.
15th December 2015
The old aphorism of death and taxes remains as true today as when it was first coined way back by American President, Benjamin Franklin. However, there is another certainty we can add today: audits. We can say with complete certainty that there is not a single business person in New Zealand who does not shudder at the thought of the Inland Revenue’s inevitable request to go over his or her books.
Official visits for the Inland Revenue are a regular occurrence, even if a business is run properly and all of their books are in order. Nonetheless, once the Inland Revenue has their sights on a company, it’s time to buckle up as the ride is definitely going to be bumpy; at this point speaking to the bank manager might not be such a bad idea as the unavoidable audit fee’s begin to mount. Or perhaps not.
Audit Shield protects business owners from the unforeseen, and often prohibitive, costs inherent with official government audits, investigations, enquiries and returns. By obtaining Audit Shield, your client’s can have peace of mind knowing that their expenditure is capped and can schedule their budget accordingly. Each of our client accounting firms has a dedicated Account Manager who ensures smooth implementation and is always available to field questions and provide training to you and your team members.
Tax Audit Insurance
Audits come in many forms and for a myriad of reasons. Audit Shield keeps it simple and includes Tax Audit Insurance to cover a very broad and all-encompassing definition, which you can read here. Basically, audits and other instigations are covered and all professional costs incurred in the process of being audited are also covered. With no excess or minimum claim amount, Audit Shield is Tax Audit Insurance designed with client’s needs at its centre. We recognise that being audited is an incredibly stressful experience and so we’ve made Audit Shield as simple as possible with full support available at all times.
Once the Inland Revenue decides to pursue a case, they’re a relentless juggernaut, and since 2011 in New Zealand Audit Shield has proven invaluable to a legion of satisfied clients. With a dedicated Account Manager on-hand to assist and advise at every step of the way, Audit Shield clients can rest easy at night, knowing that no matter what your fees will be covered.
When it comes to the Inland Revenue, a policy of peace of mind first is essential. It is for this reason that Audit Shield has gone from strength to strength and continues to be immensely popular with accounting firms and their clients across New Zealand. The best thing is that audit work done by you for your clients will be covered. Check out the FAQ for more information on coverage. Death, taxes, and government audits are a certainty. You can’t do much about the first two, but your audits no longer need to be terminal once Audit Shield is covering your back.