Keep up-to-date with us and what's happening in the business world |
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- Review Your Business Expenses - And Save
- Important Notices - Xero Pricing Increase & New Business Plans - 12 September 2024
- Xero: Changes to the Retirement of Classic Invoicing - Xero Tip of the Month: Set-up Favourite Reports
- Tax Question of the Month: Purchase of Franchise – Are Fees Deductible or Depreciable?
- IRD Upcoming Tax Payment Dates |
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Running a business will always mean incurring certain expenses, or ‘spend’.
Whether you’re a large family business or a small fledgling startup, there will be costs, overheads and supplier bills that mount up – and these expenses will gradually chip away at your cash position, making it more difficult to grow and make a profit.
So, what can you do to reduce your spend levels? And what impact will this have on your overall margins, profits and ability to fund the next stage in your business journey? Getting proactive with your spend management Spend management is all about getting in control of your expenses – and, where possible, aiming to reduce the level of costs and overheads that you incur as a company.
Why does this matter? Well, excessive spending eats into your cashflow, reduces your profit margins and stops you from achieving the profits that you’re capable of as a business. So if you can get proactive with your spend management, you can actually make your company a far more financially productive enterprise – and that’s great for your overall business health.
So, what can you do to reduce spend and slim down your company expenses?
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Reduce your overheads – Your overheads are the unavoidable costs of running your business, producing your products or supplying your services. If you have bricks and mortar premises, these overheads will include rental payments, utility bills and even the cost of paying your staff. Drill down into the numbers and see where there are opportunities to reduce these overhead costs. That could mean moving to smaller premises, review your electricity supplier, or reducing the size of your workforce, to reduce payroll expenditure.
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Put limits on staff expenses – If your employees can claim expenses, or buy raw materials and equipment with the company’s money, these costs can soon start to rack up. It’s a good idea to put a spending limit in place, so each staff member can only spend up to an agreed amount. Having a clear expenses policy helps, as will training up your staff in good spend management techniques. Specialist expenses card software allows you to quickly set spend limits, track expenses and pull your expenses data through to your cloud accounting platform for processing.
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Benchmark your current suppliers – If you can reduce your supplier costs, this will go a long way to bringing down your overall spend. If you’ve been with certain key suppliers for years, look around for new quotes, look at current market prices and see if you can negotiate better deals. And if your old suppliers aren’t flexible enough, try swapping to newer, more eager suppliers who will be willing to meet you in the middle on price.
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Make your operations leaner – the bigger your operational costs are, the less margin you’ll make on your end products and services. One way to resolve this is to aim for a ‘lean approach’, paring back your staff, resources and operational complexity to the bare minimum. By making the business as lean as possible, whilst still delivering the same output, you keep your revenue stable, but reduce the spend level that’s eating into your cost of goods sold (COGS). The smaller your COGS, the more profit you make on each unit or sale – and that means better cashflow, more working capital and bigger profits.
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Explore tax reliefs – Tax costs are an unavoidable expense when running your business, but it’s worth exploring which tax reliefs, grants or other business benefits you may benefit from. For example, research and development (R&D) tax credits may be available to you to help cut your corporation tax expenses.
Talk to us about improving your spend management
If you’d like to get in control of your expenses, we’d love to chat. We’ll review your current costs and will highlight the key areas where expenses can be cut. Then we’ll help you formulate a proactive spend management programme, to reduce your unnecessary spending. Get in touch to start reducing your spend on 04 970 1182. |
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New Personal Income Tax Thresholds: New IR330 Tax Code Declaration form
With the new personal income tax threshold now in effect as of Wednesday, 31 July 2024, it is essential to ensure that your payroll software is updated to reflect these changes. If you use IRD’s tax tables, please check the updated version available on their website. For those using Paysauce, this update has already been taken care of for you.
Additionally, a new IR330 Tax Code Declaration form has been released. If you need to update an employee’s tax code, please ensure you use the new IR330 form and not the old orange forms after 31 July. The new form should be used for any new employees or changes to existing employees' tax codes. If you have employees that are earning between $48,000 to $70,000, they will also certainly need a tax code update, due to the extended Independent Earner Tax Credit.
To view the new form, click on the button below. |
Cryptocurrency Tax Records The Inland Revenue is now intensifying its efforts on targeting cryptocurrency users who are actively dealing in cryptoassets but have not declared the income from them in their tax returns.
Whether you're holding, trading, mining, staking, lending, or otherwise investing crypto assets, your gains are likely to be taxable, so it's important that you are aware of the tax implications.
By contacting us and informing us of your cryptocurrencies, we can help you get on top of your tax obligations early, so you don't end up with an unexpected tax bill further down the line, saving you valuable money, stress, and time.
If you have any cryptocurrencies that you have not yet advised us of, please get in touch with our team today at 04 970 1182. |
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XERO PRICING INCREASE & NEW BUSINESS PLANS - 12 SEPTEMBER 2024 |
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From 12 September 2024, Xero is launching three new streamlined business plans (Xero Ignite, Xero Grow and Xero Comprehensive) and enhancing the Ultimate plan in New Zealand. These new plans are designed to provide you with easier access to the tools to help run your business efficiently. That means more key features included, with fewer plans and add-ons to navigate.
The three new plans will replace the Starter, Standard and Premium plans, which will no longer be sold from 12 September 2024. Existing add-ons will no longer be available for separate purchase from this date. |
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With the introduction of the new plans, there will also be some changes to pricing. Depending on which Xero plan you subscribe to, the new monthly fees will be as follows: -
Starter plans (changing to Xero Ignite) increase by $2 a month to $35+GST a month
- Standard plans (changing to Xero Grow) increase by $4 a month to $75+GST a month
- Premium plans (changing to Xero Comprehensive) increase by $5 a month to $99+GST a month
However, as you know, we pass on our Xero Platinum Partner discount to all of our clients, so the new price of your Xero subscriptions, through All Accounted For, from Thursday, 12 September 2024, will be as follows: -
Starter plans (changing to Xero Ignite) increase from $28 to $29 new price +GST per month
- Standard plans (changing to Xero Grow) increase from $53 to $56 new price +GST per month
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Premium plans (changing to Xero Comprehensive) increase from $69 to $73 new price +GST per month
Phased move to new plans:
Starting September 12, 2024, Xero will begin moving subscribers to the new plans in phases, depending on their current plan and any add-ons. By March 2025, Xero aims to migrate all customers over to these updated plans.
Rest assured, Xero will contact you before making any adjustments to your current plan, ensuring that you receive a minimum of 60 days’ notice before your plan is moved.
You don't have to do anything right now. Xero will send out more information and updates in the coming months to keep you informed and prepared for the changes.
For more information on the new plans and pricing increase, click the buttons below. |
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XERO: CHANGES TO THE RETIREMENT OF CLASSIC INVOICING |
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On 2 September 2024 at 9 am NZT, all Xero invoicing users will automatically default to the new invoicing version each time they log into Xero.
You can still switch between the classic and new system until the extended deadline date of 20 November 2024. However, we strongly recommend transitioning to the new system as soon as possible to become familiar with its features and new interface.
If you are not already using new invoicing, now is the perfect time to make the switch. By familiarising yourself with the new version now, you'll have plenty of time to adjust and get comfortable with the updated interface. |
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How do I make the switch:
You can make the switch to the new version of invoicing by clicking on the 'switch to new version', button in classic invoicing. You can also switch back to classic invoicing until it's retired, giving you the flexibility to choose which version works best for you. Xero also offers helpful resources and support to guide you through the transition process. Resource: Your Guide to New Invoicing
Xero has launched 'Your Guide to new invoicing', a course designed to help you familiarise yourself with the new version of invoicing and learn about the latest tips and tricks to get the most out of your experience. If you’re yet to give new invoicing a go or want to see what common tasks and new functionality look like under new invoicing, take a look. The course covers everything from creating a new invoice to adding discounts, adding items, adding a payment, and more. To access this resource, click on the button below.
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We're here to help:
If you need any assistance with the transition, please don't hesitate to contact our team on 04 970 1182. We're here to help. |
XERO TIP OF THE MONTH: SET-UP FAVOURITE REPORTS |
Are you looking for a quick way to access your most commonly used reports in Xero? Simply mark them as favourites in the Accounting menu. This will not only save you valuable time but also allow you to effortlessly locate all your important financial information with a click of a button. To mark a report as a favourite: - In the Accounting menu, click 'Reports'
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Find the report you wish to mark as a favourite - If you can't see it, click 'More Reports' to expand the section
- Then, click the star icon next to it to mark it as a favourite. (To unmark a report click the star again).
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Your favourite reports will now show up on your accounting tab dropdown.
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| TAX QUESTION OF THE MONTH: |
QUESTION:
A company is a franchisee who purchased a franchise business from a private owner/franchisee 6 years ago for $450,000.The regional franchisor must approve the purchase of the business by the incoming franchisee and give them a licence to operate for 10 years.
The company was always under the impression the licence would be extended. However, the regional franchisor has confirmed that the company must pay for the 10-year licence again when renewing.
Considering that the business is worth nothing (as the current franchisee cannot sell the licence), can the $450,000 paid for purchase of the franchise be amortised over 10 years? ANSWER:
The capital limitation may apply to prevent the deduction of any fee paid upon the establishment of a franchise relationship – see s DA 2 of the Income Tax Act 2007. For example, in Labrilda Pty Ltd v DFC of T 96 ATC 4303, a service station operator was not allowed a deduction for the $25,000 accreditation fee paid to Mobil Oil to receive the benefit of the Mobil system, detailing the layout of the service station, its operation and the use of Mobil trademarks. Training and financial assistance were also part of the package. The court ruled that the fee was a capital outlay because it related to the taxpayer’s profit-yielding structure.
Similarly, in Case S24 (1995) 17 NZTC 7,169, the taxpayer sought to deduct an initial franchise fee of $22,000 for a 10-year term with a right to renew for five years. The fee covered various business establishment costs and training programmes. It was held that the expenditure was non-deductible capital expenditure. The payment brought into existence exclusive trading rights, providing a territorial monopoly for at least 10 years, and that was an advantage for the enduring benefit of the structure of the taxpayer’s business. The payment was also made on a one-off basis and was non-recurring.
Therefore, the franchise fee is a non-deductible capital expenditure and is not depreciable or amortisable property. It does not come within the definition of depreciable intangible property and is not listed in sch 14 of the Act.
However, some of the rights conferred by the franchise agreement may be depreciable intangible property that gives rise to a deduction for a depreciation loss. Examples could be the grant to the franchisee of the right to use a trademark or the right to use a secret formula or process. A depreciation loss may be available if the consideration payable by the franchisee can be attributed to components that are depreciable intangible property. |
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IRD UPCOMING TAX PAYMENT DATES |
Provisional Tax - Due 28 August 2024
Are you due to pay provisional tax on 28 August?
For many businesses, this will be the first instalment for the 2025 tax year. Meeting this deadline is crucial to avoid steep interest and late payment penalties from Inland Revenue (IR). Therefore, it's important to prepare ahead and ensure you have enough funds to cover this upcoming payment. Check out these tips below to ensure you're prepared for this date:
1. Assess your cashflow: Check to see who owes you money, chase up those payments, and even see if you can get payments sooner or delay payments to suppliers.
2. Consider using tax pooling: Tax pooling can be a big help, allowing you to pay 28 August provisional tax at a time that suits, without incurring late penalties. If you're interested in setting up tax pooling for your business, get in touch with our team today to talk you through the options in more detail on managing your tax better. 3. If in doubt, contact us: As always, we are here to help, so if you are unsure or have any concerns about your provisional tax instalment, please contact the team (advice@aafl.nz or 04-970-1182), we are more than happy to discuss your situation. July GST - Due 28 August 2024 A reminder that GST for periods ending 31 July 2024 is also due for payment on 28 August 2024. |
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