Are you British? UK Inheritance Tax has very long arms

The new British government’s summer Budget includes two significant items affecting non-domiciled residents from April 2017. Individuals who have been UK-resident for more than 15 of the past 20 years will become liable to UK tax on all overseas assets.  Even if you managed to fly the coup, all non-domiciles’ UK residential property will be liable to UK inheritance tax whether held directly or indirectly via an offshore structure.  So if you have property back in ol’ Blighty, it could still be in the net.

There are also some fish hooks that could result in you still being considered UK-resident.  Something as simple as your will wishing to inter your remains (or not specify otherwise) in the United Kingdom could result in you being considered UK-resident.  It would be timely for you to review your Will.

It is important that if you have originated from the United Kingdom, or have assets in the United Kingdom (that means you too Kiwis!), you familiarise yourself with the tax implications your Estate could have.  Non-payment can carry significant penalties and Her Majesties Custom & Excise don’t accept ignorance as an excuse!

Trust Review will happen, just not right now

Justice minister Amy Adams said that the Government had accept the recommendations of the 2013 Law Commission’s review of Trusts and Trust Law in New Zealand.

At the latest Law Society Conference, Ms Adams said that a new act is critical and long overdue.  There has been no major reform to the Trustee Act since it’s formation in 1956, almost 60 years ago.

Although Ms Adams has said that it is one of her core requirements, don’t expect to have an exposure draft (the first step in passing the reform legislation) until the end of next year.

Ms Adams said the delay was necessary to ensure there aren’t any unintended consequences in the new Act.

New Zealand has more Trusts per capita than any other country with a trust for every 18 New Zealanders, nearly double Australia’s one for every 34 people and compared with 148 in Canada and 294 in the UK.  It works out at around a quarter of million Trusts.  It’s estimated that 15% of residential property in New Zealand is owned by Trusts.

What does this mean for us?  Well, most likely using Trusts will become more onerous and costly, as many of the recommendations involve greater transparency (i.e. the need to open up records and information to vested parties), greater Trustee responsibilities (i.e. personal liability), and possible regulatory oversight (i.e. something similar to the Companies Office that Companies must report to).  These changes will no doubt result in a reduction in the number Trusts as people decide that the Trust has become too costly, or risky, to continue with.

It still comes back to making sure you are using a Trust for the right reasons.  Although in the past Kiwis have treated it otherwise, Trusts aren’t for everyone.

Budget 2015 Explained

The seventh Budget from Finance Minister, Bill English is very much a balancing act with increases in benefits for some citizens offset by the removal of incentives for others.

Family Forecast

Fresh off plenty of political discussion around Child Poverty, the Government has introduced benefit increases for families with children by $25 per week after tax, the first non-inflation adjusted increase since 1972:

• Childcare assistance for low-income families will increase from $4 an hour to $5 an hour for up to a maximum of 50 hours of childcare a week for each child.

• Student Allowances for families with children will increase by $25 a week.

• Both the Working for Families (WFF) in-work tax credit and the WFF tax credit abatement rate will increase from 1 April 2016:

* Low-income working families earning $36,350 or less a year, before tax, will receive an extra $12.50 per week and some very low-income families will receive an extra $24.50.

* Working families earning more than $36,350 will receive more from WFF, but the amount is dependent on each family’s income and it won’t be more than $12.50 a week

* Families earning more than $88,000 a year will see slightly lower WFF payments, with the average reduction being around $3 a week

These increases have been tempered by part-time working beneficiaries needing to work 20 hours per week versus the 15 hours of the past.  Sole parents and partners of beneficiaries are also now expected to seek at least part-time work once the youngest child turns three, as opposed to five years previously.

Travellers Tax

A new Border Clearance Levy will be introduced from 1 January 2016, targeted to assist funding Biosecurity and Customs activity.  The levy is expected to be $16 for arrivals and $6 for departures. Almost half of arrivals and departures in the year to April were New Zealanders travelling for holidays, on business and for family reasons. Those that can afford to travel internationally are basically paying a new tax, raising $100m a year.

Slower out of the blocks

The $1,000 Kiwisaver kick-start incentive payment is no longer available for new sign-ups and will save $175 million in 2015/16.

Motoring ahead

ACC Levies will continue to reduce, In the 2014 levy round reductions were made to the Work and Earners’ Accounts. This year’s focus is on Motorists This includes reductions to the licence fee and a drop of 3 cents per litre off the petrol levy.

No longer flogging the dead horse

From 1 April 2016, the IRD will have more discretion around writing off penalties (not the core payment) for non-payment of child support.  The Government wanted to provide more tools for the IRD to work with parents on controlling and managing their child support debts.

GST tinker

Payments made to social housing providers will be GST exempt once legislation is enacted.

The Tax-man Cometh

The IRD are being given an extra $74 million over the next five years to beef up their investigative and compliance teams.  Historical data has shown that the IRD gets at least $7 extra for each $1 invested in reviewing tax payer compliance.  The Government is directing the IRD’s efforts towards property investment, a very political move given Auckland’s booming house prices.

 

Safe as houses

The focus in this budget is on damping down property speculation rather taking a slice off the family home.  There will be a two-year window for sales of residential property. If residential property is bought and sold within two years, it will be subject to tax. This does not apply for:

• tax payers selling their family home
• inherited property, and
• property that is being transferred as part of a relationship property settlement

The new rules will apply to properties bought on or after 1 October 2015. More detail is expected to come out in July. It’s important to note that if you intend to sell a property outside of the 2 year timeframe, the sale may still be subject to tax, as it may still fall within other rules relating to the taxation of property.

Land ownership

In addition, anyone buying or selling land, both New Zealand residents and non-residents, will have to provide an IRD number as part of the land registration process. All sales of land, other than sales of the main family home, will be subject to this requirement. In addition to providing a New Zealand IRD number, non-residents will also have to:

• provide their country’s equivalent of an IRD number, and
• open a New Zealand bank account

 

Boosting business

$345million has been targeted for business growth, with initiatives of

• $80million for R&D Growth Grants
• $25million to establish Regional Research Institutes for scientific research
• $113million for New Zealand’s higher education system

Unfortunately the balance of business growth initiatives are more around enforcing compliance, such as assisting councils with resource management and water care reforms and  enforcement of employment laws. The main area affected for businesses in New Zealand will be around those involved in Property.

What does this mean for me?

The budget was very much one that focus on social services and support in New Zealand.  $375 million on ACC, $790million on Child Hardship, $939million on Capital Investment (infrastructure), $305million on the Social sector and $122million on Housing.

Bill English said the Government wanted to target the 60-80,000 families who were most vulnerable in society and after looking at various options concluded that raising the benefit levels themselves is the most effective means to achieve this.

Halfway through the standard New Zealand financial year

At Half-Time, What Is Your Score?

We are halfway through the financial year (if you have a standard balance date!) with no time for a half-time break: how is your business stacking up against the key areas below? Are you ahead of the game or slacking behind?

• Your sales forecast
• Your profit forecast
• Your staff turnover rate
• Your customer satisfaction survey result
• Your aged debtors

If you are ahead of the game, keep doing what you are doing, it’s obviously working for you. But if you are behind, what steps are you going to take to remedy the situation?

My Tip:

Decide which of the areas above are causing you the most concern and get together with your management team or business strategist to come up with a plan to work through the issues.

Don’t leave it any longer to act on a problem that may spiral out of control if left unchecked.

Always Give 100%

Unless you are donating blood.

Speaking of which, the Blood Donor Service is coming to Pukekohe at the Pukekohe War Memorial Hall on 22 July to 26 July.  Come and make a deposit, you never know when you may be making a withdrawal!

What’s in a good email?

I received a superb email from Stephen Lynch at Results.com.  He succinctly summarises how to compile a good email.

The number of software tools we have for communication and collaboration is expanding all the time, but the trusty old email is going to be with us for a while yet. Depending on which research you look at, approximately 300 billion emails got sent every day, and the average business leader receives 100+ emails per day. It is becoming increasingly stressful to keep on top of it all.

Thankfully, email tools are now available to help us filter and prioritize the deluge of information that comes into our world. These filtering tools will make it even more important for business leaders to improve the effectiveness of their email communication – that is, if you want to cut through, and get your emails noticed by the person you are sending them to.

 

Clarify your intentions.

Before you even begin typing, think about the specific action you want the reader to take. Finish this sentence: “When the reader has finished reading my email they will……”

 

Summarize your topic in the subject line.

People receiving 100+ emails per day scan the subject line of every email to decide how soon to open, and whether or not to file or delete your message. If your subject line is vague you have already blown your first opportunity to move to the head of the queue.

 

Also, it is highly frustrating to have to wade through lists of emails, and re-read the content just to find the particular one you are searching for. Do us all a favor, and take the time to write a decent subject line explaining the key thrust of your email in the first place.

 

Identify yourself clearly.

If you are introducing yourself to someone for the first time, always include your name, company, and any other identification information in the first few sentences. Then provide the context for why you are writing to them.

 

Start with the conclusion.

As a general rule, always start with the key point you want to make in your opening sentence – and then elaborate on this point in the following sentences.

 

One topic per email.

If you have a number of points to make, you could number your points to ensure they are all read. In this case, you should state that your email contains multiple points in your opening sentence.

 

However, it is usually better to split your key points into separate emails so your reader can respond, file, or delete each email individually. You goal should be to keep every email short and to the point.

 

Consider the reading device.

Many emails are read on mobile devices these days. Do they really want to download and open the large attachment you have sent? Do they really want to have to click on links and wait while the web pages load? Do us all a favor, and summarize the key points of any attachment or link into the text of the actual email.

 

Stay classy.

When you are writing to a friend or a close colleague, it may be OK to use emoticons and abbreviations. If you are writing your email on a mobile device, typing is more cumbersome, and it can be very tempting to abbreviate and be more abrupt than you normally would be with a full size keyboard. Without realizing it, you can come across as being rude or overly familiar. Unless you are drinking buddies, always err on the safe side and keep your emails friendly but professional.

 

Email signature.

Add an automatic email signature with your company branding and standard contact information. Make it easy for someone to add you to straight into their contacts folder and CRM without creating a whole lot of extra research on their part. And does anyone really care about your screeds of legal disclaimers that clog up email chains? (No they don’t)

 

Measure twice, cut once.

Double check that you are sending the email to the right person. Always use a spell check and proof read before sending. If it is a marketing email, always get someone else to proof read it and sign it off. When you are too close to a project you can easily miss some glaring errors. First impressions count.

 

Never write an email in anger.

Draft something out to clarify your thoughts if need be, but don’t send it. Just like diamonds, emails are forever. Sleep on it. You will be glad you did, because things always look different tomorrow. I repeat – sleep on it, and then re-craft your email the following day.

Trust me on this one. (You will thank me tomorrow).

 

Stephen Lynch

Chief Operating Officer – RESULTS.com

 

Stephen writes superb updates like this that you can subscribe to at http://www.results.com.

 

Till next time

Lincoln

Unflusterable

I read a great post from Michael Hess on five techniques to keep your image as someone with positive actions and attitude:

1. Never let ’em see you sweat. A really hard-to-please customer can test even the best service professional, but it’s a test you can and should pass with flying colours  Keep a genuine smile on your face (a fake one is worse than none at all), listen more than you talk, and never stop visualizing and telegraphing a happy conclusion.

2. Own it. Whatever “it” is — a real problem, a special request, or even a seemingly unfounded gripe. The what, why, who and when (especially the latter — the past is the past) are far less important than what you do next. So don’t look for another person or place to dump the issue — grab it and run with it. If you need help or authorization, get it, but don’t relinquish ownership of the issue.

3. Take your opinions and emotions out of the equation. Too many employees take business personally, and while there are times when a customer has a problem with a specific employee, more often she is just shooting the messenger. It’s not about you — take the bullet.

4. Let your default answer be “yes” (or “certainly,” “absolutely,” or any variation thereof). If there isn’t a really good reason to say no, don’t look for one. I’m not saying you should be a doormat or give someone $20 to break a five-dollar bill, I’m just saying that it’s always best to look for ways to say yes. Saying yes to even half of what a customer asks for has a shot at making him happy; saying no is guaranteed not to.

5. Do something, fast. Minimize the amount of time you spend discussing, explaining, debating or negotiating. The sooner you get to some positive action, the less time there is for the customer to stew, grit her teeth and think of more (increasingly legitimate) reasons to be upset. Start solving before the end of the problem even leaves her lips.

Great ideas.

Rest Home Subsidies vs. Gifting

The following is content from the CCH Q&A Service around where gifting by couples can fall foul of entitlements to rest home subsidies.  Many people have been merrily gifting to their family trust expecting to be able to tap in to rest home subsidies in the future.  The following will come as news to many.

QUESTION:

Have there been any new developments around the issue of how gifting affects the residential care subsidy?

I know that Work and Income New Zealand (WINZ) takes the view that couples with family trusts who have been part of a gifting programme and have gifted $27,000 each per annum will have breached the threshold to qualify for the subsidy.

Has there been any clarification of this issue by WINZ or Inland Revenue?

ANSWER:

Clarification of this issue has been provided by the High Court in B v Chief Executive of the Ministry of Social Development [2012] NZHC 3165. (WINZ is the service delivery arm of the Ministry of Social Development.) The decision, released in late 2012, concludes that where couples have together gifted $54,000 annually in a gifting programme, the spouse applying for a residential care subsidy will have breached the $27,000 threshold.

The legislation at the heart of the case is the Social Security Act 1964, which has means-testing provisions for both assets and income. Section 147A states that where a person (or the person’s spouse or partner) applies for a means assessment, and that person has “directly or indirectly deprived himself or herself of any income or property”, the chief executive has a discretion to assess the person as if the deprivation has not occurred. The Social Security (Long-term Residential Care) Regulations 2005 state that this definition of deprivation of property includes gifts in a 12-month period that exceed $27,000.

As a result of this decision, most couples with family trusts who have taken part in conventional gifting programmes will not qualify for the residential care subsidy.

REFERENCE:

Social Security Act 1964, s 147A.

Social Security (Long-term Residential Care) Regulations 2005, regs 9, 9B.

B v Chief Executive of the Ministry of Social Development [2012] NZHC 3165.

GD Clews “Over-gifting and Rest Home Subsidies” <www.taxcounsel.co.nz/Resources/NZ+Tax+Case+Notes/Case+Notes+2012/Over-gifting+and+Rest+Home+Subsidies.html>.

V Ammundsen “Residential care subsidy up-date for couples” (5 December 2012) <http://mattersoftrust.wordpress.com/2012/12/05/residential-care-subsidy-up-date-for-couples/>.

(Disclaimer – this is general advice and may not be appropriate to your own unique position.  Always seek specific application to your circumstances from an expert.)

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New and Improved! The website that is!

Have you ever looked at the phrase “new and improved”? How can something be improved if it is new? Before you fold your brain in two over that conundrum, check out our awesome new website.  Very keen to hear feedback if you have it.

Hope your Easter is starting well, and the Easter Bunny is bringing you everything you desire!

Xero – Beautiful Accounting Software

I love Xero (www.xero.com).  I recommend it to my clients, my firm uses it for our own accounts, and I use it on my personal accounts.  The staff at Campbell Tyson are experts with it, and I swear that it makes your financial life much easier. 

At Campbel Tyson we are so excited about Xero that we are offering a free demonstration to our clients and public-at-large on Wednesday 17 April at 5.30pm.  During light refreshments and over the course of an hour, prepare to be wowed at what Xero could do for you and your business.

Believe you me, you don’t have to be an Accountant to get value out of this session, so speak with Jacqui on 09 238 9219, or at reception@ct.co.nz to book a spot at what will be a very popular event.

See you then!