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THE OFFICIAL NEWSLETTER OF

“It was a beautiful bright Autumn day, with air like cider and a sky so blue you could

drown in it”

Diana Gabaldon

As of 1 June 2019 our Te Aroha and Morrinsville op-erations are parting ways and will be operating inde-pendently. The Te Aroha office will continue to operate under the “Diprose Miller” trading name and will maintain a physical presence in Morrinsville with a new office on Thames Street. The Morrinsville office will operate under the trading name “MBS Advisors” and retain their existing Mor-rinsville premises. From a client’s perspective it should be “business as usual” going forward. Letters have been sent to clients of both offices to inform them of this change in operat-ing structure. Any queries from clients can be directed to your advisor.

IMPORTANT NEWS

The big news for Diprose Miller is that the Te Aroha and Morrinsville offices are parting ways at the end of May. All clients have been notified of the split in writing, so there is no need for me to elaborate further in this column. However, if you have any particular queries regarding future business arrangements please contact your advi-sor. From a client’s perspective, it will be business as usual.

Easter is now behind us and last few Autumn days have seen awe-some weather. Hopefully these conditions continue, with many peo-ple taking extended leave through to ANZAC Day and beyond. Keep safe and enjoy the break!

Personally, the year has been a battle, getting used to a new “time and cost” system and mov-ing all clients to the Xero software platform. All credit to our staff who have worked tirelessly to meet tax return filing targets. Apologies to cli-ents where we were later than usual completing your financial statements.

It’s been a tough year so far for farmers with the big dry starting in the New Year and working its way through to mid-March. Even now, some regions are still too dry. Fortunately, the payout has stood up. For the business sector, the end of the financial year has come and gone, so we will soon be working on your 2019 financial statements. I expect tradies and support services will have done well as local conditions seem quite buoyant. It will be interesting to see the re-sults of our retailers who have battled in the last couple of years.

For investors, interest rates remain low and I often talk to clients about alternatives. For retiring farmers who have done well from land, the thought of investing in shares and bonds doesn’t have much appeal, however there are also risks with residential and com-mercial investment. For those who have sold property, take your time, consider your options and talk to people who have a good track record in the investment field.

“Hard work spotlights the character of people. Some turn up their sleeves, some turn up their noses and

some don’t turn up at all.” Sam Ewing

With all the talk about a prospective Capital Gains Tax, it’s easy to forget that new legislation intended to take effect from the 2019/20 financial year will “ring-fence” residential rental losses. For most property investors, the new rules will likely apply from 1 April 2019.

Ring-Fencing ?????? Residential Property Investors Beware !!

So what does the ring-fencing legislation actually mean?

Historically, investors who generate tax losses from their residential rental activities have been able to offset these against their other income, often resulting in income tax refunds. Usually the losses are created when the investor has borrowed heavily to fund the pur-chase of the property, or has incurred significant maintenance ex-penses during the year.

Under the new rules, investors who generate tax losses from their residential rental activities will only be able to offset these against other residential rental profits. Any excess losses will be carried for-ward to future years. Some losses may never be claimed.

The thinking behind this change is that taxpayers who benefit from tax-free capital gains on residential rental properties should have their claims for expenses limited to the amount of rental income. This being the case, if a genuine Capital Gains tax is introduced in the future, the ring-fencing provisions will need to be reviewed. We note that in the last week the Government has held off finalising the legislation and may yet change the date on which the ring-fencing provisions will start to apply.

This change will affect many of our clients and we encourage you to contact us if there is any aspect of the new rules that you would like to discuss.

If the proposed rules go ahead, only repairs and maintenance costs incurred before April 2019 are guaranteed to be fully-deductible.

Claims for repairs and maintenance carried out after this date may be subject to a limited claim.

I asked our Corporate Wellness Officer (CWO), “Can you teach me yoga?” He said “How flexible are you?”

I said, “I can’t make Tuesdays.”

The introduction of a Capital Gains Tax (CGT) has been the major talking point after the government’s “Tax Working Group” recom-mendations were released recently. However, there’s also a section on taxing “negative environmental externalities” (great phrase!). This covers three main areas that will be of interest to rural clients.

Tax Working Group Not Just After CGT

1. The inclusion of agriculture in the ETS. A free allocation of 95% of the required carbon tax would be made initially, with the 5% balance paid based on an estimate of carbon output for each farmer. The free allocation would drop over time to align with zero carbon emissions by 2050.

2. The application of a tax to reduce water pollution, possibly based on inputs such as fertiliser use.

3. The addressing of Maori rights and interests with a view to a tax being imposed to encourage efficient water use.

The Working Group also raised the possibility of “congestion pric-ing” in Auckland to reduce greenhouse gas emissions and a levy to reduce solid waste.

Insulate Those Rural Dwellings ! A reminder to farming clients that from 1 July 2019 all rural dwell-ings must be insulated to the latest standards. This applies whether the dwelling is rented or provided to farm employees as part of a “service tenancy” under their contract. A $4,000 fine applies for non-compliance. The insulation requirement is likely to become a stand-ard condition of employment agreements in the farming sector.

Business Development Services Over the next few months we will be introducing a new business planning and review service to clients. This service is intended to assist clients in achieving their long-term financial goals in a way that aligns these with their personal goals and can apply to both farming and non-farming businesses. The service applies a process of goal-setting, monitoring and review that allows us to work closely with the client to give the best chance of securing the desired result. You’ll hear more from us about this initiative very soon, but we’re excited about the potential benefit for our clients.

The Charities Act is in for “modernisation” and the government is calling for submissions on wide range of important issues. They are also holding information meetings throughout NZ in March and April. Further information on this process can be found at www.dia.govt.nz/charitiesact.

More “Modern” Charities Act

Walking the Walk ! In the last week of March we sent some of our staff out into the Morrinsville community to clean the “Herd of Cows” sited around the town. Not only did this make the cows look more contented, but it had the added benefit of giving the staff some well-earned time outside the confines of the office. We’re told that the staff decided to leave Mabel the mega-cow for the directors !

Enthusiastic Morrinsville staff members tackle the cow outside United Video

Companies Look Out ! From 1 May 2019 we will be sending our company annual re-turn reminders to clients via email rather than by post. Howev-er, we are aware that they may appear in your “spam” or “trash” email folder. Please keep an eye out for this email as it must be actioned within the month of issue to avoid possible removal.

Employers Beware !! From 6 May employers who do not provide their employ-ees with written employment agreements will be fined $1,000 for each employee. The Employment Relations Act 2000 already states that a written agreement is compulsory, but from 6 May a prescribed fee has been included for non-compliance, so we would expect this to be enforced.

From Our Legal Exec Desk . . . . Our qualified legal executive, Michelle Way, continues her regular column with interesting comments about topical legal issues facing the accounting and legal professions.

The Common Reporting Standard (CRS) is an information stand-ard for exchange of financial information between tax authorities on a global level. It was developed by the OECD in 2014. From July 2017 NZ “reporting financial institutions” need to review accounts held by foreign tax residents and report certain information annually to Inland Revenue to be provided to overseas governments. Unfor-tunately, a number of our client family trusts fall into this category and we are developing a process for ensuring that the correct docu-mentation and reporting is carried out to comply with the legislation.

The tax topic of the month is definitely the Capital Gains Tax (CGT) proposal made by the Working Group commissioned by the coali-tion government.

A Capital (Gains) Idea !!

CGT is a challenging topic and, if introduced, could have taken a number of forms. About the only thing we can be sure of is that it would have made taxpayers and accountants lives more interesting!

We now know that the current Government has officially decided not to implement a formal CGT. We’re not surprised by this, given the reaction from many taxpayer/voter groups (farmers included) that expressed dissatisfaction at the possibility of a capital gains tax being introduced.

However, we wouldn’t rule out CGT being introduced in a more “subtle” way, perhaps similar to the current Brightline test applying to residential properties sold within five years. Watch this space!

Kiwisaver Changes Employers should be aware that from 1 April 2019 employees have the option of two additional contribution rates for Kiwisaver, 6% and 10%. The full range of options is now 3%, 4%, 6%, 8% and 10%! The maximum compulsory employer contribution remains at 3%, but employers can contribute more if they wish. Employees must com-plete the Inland Revenue form KS2 to elect a change of rate.

We’ve mentioned payday filing before, but it’s now a reality. This is our last chance to remind employers of their new obligations. The key changes are summarised below.

Payday Filing is HERE !!

We are ready to assist any clients who are not yet prepared for pay-day filing. If you need to know more, please contact Angela Millward on Extension 816.

1. Payday filing is compulsory for all employers. 2. If filing electronically, a return must be filed with Inland Rev-

enue within two days of the physical pay date for every pay period. If filing by paper, the return must be filed within 10 days or on the 15th and last day of the month.

3. PAYE is still paid on the 20th of the following month.

ACC Refunds - Taxable or Not ? Many clients have received refund cheques from ACC for over-charged levies from earlier years. These should generally be includ-ed as taxable income, since the original levies would have been claimed as deductions. GST will also be payable on the refunds.

Tax Return Changes Inland Revenue’s new “Changing for You” initiative provides for non-self employed individuals to be automatically issued with either tax payment notices or tax refunds each year based on employment and investment information provided by third parties. Technically this means that those individual taxpayers who haven’t had enough PAYE and RWT deducted from their income will be required to pay the shortfall, and those who have had excess de-ductions will be automatically refunded.

This change signals the death of the “Woo-Hoo” tax refund busi-nesses, as Inland Revenue will now be automatically generating assessment calculations for all individual taxpayers.

To make this initiative work, financial institutions will be required to provide monthly information to Inland Revenue on investment in-come earned by their customers, in a similar way that employers provide information on wages income and PAYE deductions.

The Domestic Violence (Victims’ Protection) Act 2018 comes into force on 1 April 2019 and imposes new obligations on employers in relation to working arrangements, domestic violence leave and the treatment of employees affected by domestic violence.

From 6 May 2019 the use of 90-day trial periods in an employment agreement will be restricted to em-ployers who employ less than 20 employees on the date on which the employment agreement is entered into. Any trial provision entered into before this date will still apply.

Employee Trial Periods

From 6 May 2019 minimum entitlements to rest breaks will be rein-troduced. 1. For every 2-4 hours of work, a 10-minute paid rest break. 2. For every 4-6 hours of work, a 10-minute paid rest break and

a 30-minute unpaid meal break. 3. For every 6-8 hours or work, two 10-minute paid rest breaks

and a 30-minute unpaid meal break.

Rest & Meal Breaks

Parties may agree on the timing of breaks, but if they cannot agree the breaks must be provided in the middle of the work period to which they relate.

Domestic Violence Leave

Employees affected by domestic violence can request a short-term variation to their working arrangements, even if the domestic vio-lence occurred before the person became an employee. The em-ployer must respond to the request within 10 working days of re-ceipt and may require proof of domestic violence. The employer may refuse the request if it cannot be “reasonably accommodated”.

There is now provision for up to 10 days’ domestic violence leave each year. This is a new category of paid leave. There are also pro-visions in the Act to prevent victims of domestic violence being ad-versely treated in the workplace.

“A consultant is a man who knows 157 ways to make love, but doesn’t know any women.”

Anonymous

Te Aroha staff member Megan Farac (on left in photo) completed her first mara-thon event by conquering the 50km Rotorua Ultra-Marathon last month. Megan crossed the finish line at the Rotorua Events Centre in 9 hrs 50 mins and was accompanied by good friend Megan Diprose. Fellow staff member Lyn Miller and ex-staff mem-ber Heather Neems were the support crew for the event, which Megan tells us was on her “bucket list”.

Our Social Club organised an evening of “Foot Golf” at the Te Aro-ha Golf Club at the end of February. Teams of four faced off in an attempt to secure the much-coveted “Teddy Woods” trophy.

Foot Golf for the Troops

The winning team comprised staff members Kassie Thomas, Steven Eccles, Leanne Judkins, Nicole Robinson and Nicole’s partner Stefan, who won the play-off against opposing team captain Megan Farac. After the event the players were hosted for a BBQ at the home of staff member Nakita McNab and partner Chris.

Another “Bucket List” Tick

Also clocking up ten years of service is Te Aroha receptionist Dianne Cooper. This was also cele-brated with a morning tea shout, including a fabu-lous black forest cake baked by colleague Debo-rah Young that didn’t last long on the plate. La-dies, congratulations to you both!

Where Does 10 Years Go ? Morrinsville Associate Kassie Thomas has just clocked up ten years of service with Diprose Miller. One of our original Morrinsville staff members, Kassie was presented with flowers to mark the occasion and enjoyed a tasty morning tea with her fellow staff members.

Now that we have moved our client income tax database to the Xero platform, we will be issuing future income tax payment advice letters to clients via email rather than by post. This change provides two benefits. Firstly, the new process is much simpler and faster. Secondly, we can be sure that the advice has been transmitted to the client and not delayed or lost in the mail.

Tax Payment Advice via Email

Clients who would prefer to still receive their tax payment advice letters in the post can contact our office to request this.

Due Diligence a Necessary Pain We’d had a mixed response from clients to date with our requests for identity information to keep on our file, especially in relation to client trusts, to complete the “Client Due Diligence” (CDD) process.

Please be aware that the CDD process is mandatory for account-ants under the Anti-Money Laundering legislation and there are se-vere penalties for non-compliance. It’s an administration burden we could easily do without, but if you want us (or any other accountant) to act on your behalf, you will need to provide this information.

Receiving Interest & Dividends ? A gentle reminder to clients that we need copies of all documenta-tion relating to interest and dividends earned on investments. These contain important information regarding RWT and imputation credits that can be offset against the tax on this income.

The trading banks will usually provide you with an annual summary of interest income and RWT de-ducted, but if you are not using a fund manager you will need to provide us with the individual statements for dividends received during the year.

“I have bad news and worse news” a financial advisor said to his client. “The bad news is that all your money

will be gone in 24 hours”. “Oh my gosh!” the client says. “What could be worse than that?” The advisor replied

“I should have called you yesterday”.

Many clients will be aware that Te Aroha staff member Murray Whittaker lost his home to a fire back in October. Fortunately, he was well-covered for insurance and over the last few months has been very busy organising a replacement.

A New Nest for Muzza

We’re happy to report that Muzza is now settled in his new home (on the same site) and is enjoying having eve-rything back to normal. The whole pro-cess was made much faster and easier by his choice of a transportable home that was nearly completed when he approached the building company.

He’s still got some work to do with his deck and grounds, but the house itself looks great. The crowning glory in the house for Murray is a glass kitchen “splash-back” that sports the Arsenal football club logo. We’re sure this helps make up for the irreplaceable Arsenal memorabilia that was lost in the fire.

All we’re waiting for now is the housewarming (but not too warm) party that he forgot to hold when the original house was built!

International Success Morrinsville staff member Michael Hollier recently represented Waikato University in the World Business Case competitions in Flor-ida. His Waikato University team placed third in their division, an excellent result. Their team of four was required to consider two case studies on a business and a current issue the business is fac-ing. They were tasked with developing a strategy to solve the issue. A panel of judges assessed the strategy of each team, with the fo-cus being on HR management and business culture. There were both 5-hour and 26-hour (working through the night) competitions, and Michael’s team placed 3rd in the 5-hour event. Michael’s off to Holland this month for a similar competition.

“A lot of homes have been spoiled by interior desecrators.”

Frank Lloyd Wright

Angela Millward 816 Janeece Thomson 807 Murray Whittaker 829

Angela Young 819 Joanne Scherer 849 Nakita McNab 812

Anthony Gray 805 Kathy Reily 866 Nicole Robinson 811

Barbara Jenkins 862 Keri Allen 815 Rae Brus 0

Damien Waitai 865 Kylee Elgar 839 Rebecca Fox 820

Deborah Young 831 Leanne Judkins 837 Robyn Stewart 827

Diane Cooper 899 Linda Keeys 814 Sharon Coombe 859

Ed Wagstaff 864 Lisa Wellington 860 Steven Eccles 835

Ellie O’Donoghue 868 Lyn Miller 878 Sue Brownlie 832

Erica Rigter 823 Megan Farac 800 Yvonne Avery 856

Gail Brown 802 Melissa Slattery 821

Grant Glover 895 Michelle Way 858

Andrew Pullon 731 Joy Craig 727 Nikki Brown 709

Ann-Marie Sutherland 728 Kassie Thomas 705 Sandra Green 710

Brylee Budd 711 Kayla Jeffrey 723 Sasha Belskaya 714

Cameron Jackson 736 Liam Crean 707 Sharon Lawson 729

Dan Howard 733 Linda Harding 722 Sue Brownlie 721

Deena Hobbs 703 Lisa Crawford 700 Tonya Whitten 702

Harjot Singh 724 Michael Hollier 735

Jo Walton 708 Natasha Allen 700

Te Aroha Office Extensions

Morrinsville Office Extensions

We Need the Pink !!

In late March and May (depending on balance date) we post annual 2019 end-of-year information sheets to all clients. These are a dis-tinctive pink colour and must be signed and returned to our office.

As well as giving us your written authority to prepare the 2019 financial statements and income tax returns, these documents are often required to obtain important infor-mation from banks, suppliers and ACC. Please sign and return these with your 2019 papers.