Sometimes, when it is convenient to do so, she grabs whatever cheque book she can lay her hands on to pay the bill in front of her. Thus personal bills get paid by the trust and trust bills get paid out of the company.

We have to correct the situation manually. It takes a lot of time. Surprise! The accounting fees go up.

Recently we struck an extreme case of this. Paying bills out of the wrong account is a nightmare. Never do it.

As we’ve said before, make a loan if needed to the entity which has to pay the bills. By the way, loans from one company to another can also be a headache unless the two have identical shareholdings.

This assumes you wish to have a real business you run as opposed to being a self- employed person. A real business is one you can walk away from and it will run itself while you sneak off for a quick six months holiday to explore Europe.

You should be constantly growing your database. Use it to keep in touch with customers , clients and prospects. One of our clients, a consultant, sends newsletters religiously every quarter. He generates a steady flow of new business. His problem is how to handle it all. He’s on the road to owning a business as opposed to being self-employed. He told me about a famous salesman, who is so paranoid about preserving his database, he uses three different methods, each day, to back it up. He’s a car salesman.

Grow your database through networking and other means available to you and look after this most valuable asset.

We meet many of you just once a year. By now you should have a fair idea of how well you have done for the year.

If we see you so infrequently, we cannot monitor your income and potential tax liability. In most cases this does not matter. However, if your business is a company which does not distribute all the profit to shareholders, or you have a trust, be careful. If you anticipate either of them is going to have a much bigger profit than in the previous year, you should check your tax situation.

You may be exposed to the Use of Money Interest penalty for success.

Unless your business is short of funds, it is better to pay some more tax now than to wait until we see you later in the year. The current interest rate is 8.89% and it may have been accumulating, on a small scale, since you paid your first provisional tax payment for the year. For March balance dates this is 28 August 2011.

UOMI also applies to individuals whose income generates $50,000 or more annual tax to pay. For most people this cuts in at a taxable income of $179,030.

Call us if you need any help.

Double tax

For example, while you’re there on an assignment you look for follow-up jobs and successfully negotiate new deals. The income would probably be taxable both in Australia and New Zealand.

“No problem,” I hear you say. “Isn’t there a double tax agreement which prevents me being over-taxed?”

Yes, but the top tax rates in Australia are higher than here, so could cost you money if your income is high. Also, if you are trading through an ordinary company, the tax the company pays overseas doesn’t count when it comes to paying company dividends. In the long run, you will are likely to be double taxed. Best to seek advice before you start.

Travel costs

You can often justify travel costs between the two countries. However, if you decide you are not going to use your company when working in Australia, you could find travel costs are not tax deductible. This is because, if you then start up as a sole trader, you have a new business. The new business requires you to go from your home to Australia to start work. Travel between home and work is not tax deductible. On the other hand, if you have an on-going business (through your company for example) the travel is part of your ongoing business operation and is likely to be tax deductible as the travel is between work places while you are on work.

Which costs are deductible? Now there’s another problem, which is too complex to discuss here.

There are ways around these difficulties – getting which country you are in right, when you negotiate, is a good start. Talk to us and we’ll put you on the right track.

Last year, the IRD handed New Zealand businesses just over $33 million in shortfall penalties, more than 400 of which were for gross carelessness.

Institute of Chartered Accountants tax director Craig Macalister said he saw a lot of small businesses making little errors that they often did not even realise had happened.

Most small firms filed a GST return every couple of months, and that was where a lot of mistakes happened.

Often, people would get something such as the time of supply wrong. He said although that might seem like a trivial matter, it was technically breaching the law and could land a business with use-of-money interest penalties.

“They might be looking at buying a large machine and claim the invoice before they have paid it.” Macalister knew of a farmer who sold all of his livestock, paid GST on the transaction but put the GST into his partnership GST return instead of his trust’s return. He was handed a $4000 penalty.

Patrick Goggin, IRD’s group manager assurance, said small businesses made errors over a range of things, such as using the wrong depreciation rate for things such as carpets in a rental property, arithmetic or transposition errors in the filing of the return or things that were “sometimes a little bit more deliberate”, like forgetting to make an adjustment for personal expenses, such as grocery shopping or trips away.

He said businesses could cut the penalties by contacting the department and explaining what had happened. “If they do that before any audit activity is launched, any shortfall penalties can be significantly reduced.”

Macalister said small businesses often ran into problems with income tax when it came to claiming items not allowed or not understanding the treatment of expenses.

Goggin said an error meant the taxpayer had not met their obligation to provide an accurate return. “We view very strongly that we want taxpayers to get it right. If you realise you’ve made a mistake, it is best to make a voluntary disclosure, either by talking to your tax agent or going directly to the IRD.”

He said the department would work to rectify errors that went in the IRD’s favour but usually mistakes cost revenue money. Macalister said getting good advice was key to avoiding problems. “A chartered accountant should be able to put you right.”

Advice could cover things such as cash-flow projections and many accountants would already have clients in a particular industry, so they could advise on what they had seen with other firms.

Separating them was a 2 metre wide table. Presumably the table was nice and wide to prevent anyone stretching over and throttling someone on the other side. The article stated that the parties had been involved in the world’s longest running war.

We’re not surprised if this is how they negotiate.

The photo shows how not to negotiate. If you want to reach an agreement, surely sitting opposite each other as adversaries is not going to help.

When negotiating, mix the parties so they sit next to each other. Take away the adversarial atmosphere and promote a working together feeling.

A similar situation exists when interviewing. When job hunting, if you can carefully move your chair so it is at the side of the desk instead of opposite the interviewer, you could improve your chances of success.

Charities

I personally refer people to the Charities Commission website to register at: http://www.register.charities.govt.nz/charitiesRegister

You can search here for any charity by name. If it’s there, you will get:

1. its registration number (which is what IRD wants for the donation deduction – it should be on the receipt but sometimes with small and voluntary bodies it’s missing); and
2. you can download a PDF of their latest accounts and see what the charity is actually doing with your money (can be interesting)!

If it’s a registered charity, IRD will allow the claim.

Sandwiches

I was recently in a café up north which, like the one you describe, had a cabinet with very few sandwiches in it, but it also had a sign. I can’t recall the exact words now but they were to the effect that

1. the ones in the cabinet were for those in a hurry;
2. they prefer to make your sandwiches to order to give you exactly what you want;
3. they would do it within X minutes (two, I think) of your order or it would be free.

They seemed to be doing OK.

Unfortunately, this does not mean a couple with one working partner can simply share the company income equally. If they were to do this, and there was a tax saving it likely to be tax avoidance. The sole working owner should generally be paid a market salary.

Working shareholders must also enter into an employment contract with the company (see Time to get financial records in order, page 1) If you fail to have a signed employment contract which complies with the LTC law, you are not an employee for tax purposes and the wages paid become non deductible for tax purposes.

Further, as you are not an employee, fringe benefit tax does not apply. Therefore if you use a business vehicle partly for private purposes, you would have to keep a log book. Costs would need to be apportioned between business and private.

Make sure you have employment contracts if your company is going to pay wages to its working owners. Last September the IRD proposed to do away with FBT on cars used for private running by owners. They would have to keep a log book and apportion running costs, regardless of whether they were on PAYE. This change has not yet become law.

It was incorporated in the last tax Bill and may yet get dumped, hopefully.

What if your LTC is an investment company?

You are not permitted to pay one of the owners a salary even if this could be justified. Assuming your investment is a rental property, if you need to use a car, you could only claim a share of the costs, based on mileage disclosed by a log book, or you could claim kilometres run at rates permitted by the IRD.

• It’s unsafe to throw out bank account details - your own or those of the people you pay.

• Check, regularly, your on-line bank account details are the same as those shown on the creditors’ invoices. Businesses change hands.

• Does your business insurance protect you from fraud?

• If staff are paying the bills using internet banking, have two people authorised to make each payment. Police this rigorously. An authoriser should not be allowed to give their access token to the other authoriser when they go on holiday.

Provide for the absence of an authoriser.

• Set authorisation limits for those who have access to the business bank account.

Set authorisation limits for those who have

access to the business bank account. 

If the answer question is yes, get your secretary/nurse/receptionist to methodically contact all patients/customers a day or two in advance of their appointment.

Easy ways to do this are email (and get a read receipt) or text, but the more effective way is the telephone.

Keep a black book of those who missed their appointments.

First offence – send out a letter explaining why it is bad to miss the appointment.

Second offence – bill them. Do you really want them as customers or patients, anyway?