Growers Beware! Contractors can cost you twice.

Contractors can be great help around agricultural, horticultural and viticultural businesses.  Labour can be switched on and switched off as required, you don’t need to worry about their ACC, Kiwisaver, Sick and Annual Leave, and you normally only pay for the work they do.

BUT.  You still need to deduct withholding tax from what you pay them.

Say what?  

Yes, you heard right.  The IRD require businesses in the agricultural, horticultural and viticultural industries to deduct withholding tax from payments to contractors and pay it directly to the IRD, much in the same way as PAYE for employees.  There is an exclusion for Post-Harvest Facilities contractors, although you use this at your risk.

Why my risk?

As you are obligated to deduct the withholding tax before paying it to the contractor, it is you the IRD will come to for payment. The IRD can demand it even if you paid the gross amount to your contractor.  Its then up to you to recover the withholding tax element you incorrectly paid across to your contractor.  This can be problematic if the contractors change regularly, are seasonal, or may simply not have the funds to repay the amount.

How much?

If you have a IR330 tax code declaration the rate is 15% of pre-GST charges.  If you don’t have a IR330 tax code declaration form, the rate is 30% of pre-GST charges.

The contractor may have a withholding tax exemption certificate (they use an IR332 to apply for this), which means you don’t have to deduct anything.

You don’t want to have to end up paying 15% more for your contractors.  The IRD can go back a number of years, with late payment penalties and interest, which can make this really expensive.

What’s the likelihood of this affecting me?

We have noticed increased activity in this area from the IRD.  Most of the activity has come about as the IRD chase contractors dodging their tax requirements, which can naturally lead back to their customers – you.

Even if you believe you are low risk, I strongly recommend you assess your exposure and change your business processes to reduce the financial impact of any possible audit.

Speak with your Accountant now!

Meetings, meetings and, oops, another meeting

Stephen Lynch from Results.com has a great strategy he uses to ensure when he is meeting with a team member, its a productive discussion:

As a leader, you want to encourage your people to think though the issues first, and make good decisions themselves.  Alternatively, if it is a situation where they really do need your input or sign off – you want them to present all the options along with their thoughtful recommendation as to what the right decision should be.

I recommend training your people to use GROW framework to think through the issues – and even have them present issues to you in this manner.

G = Goal

What is the goal?  What is the outcome we want to achieve here?

R = Reality

What is the current reality?  What is happening and why?

O = Options

What options do we have?  What are the implications of each option?

W = Will

What WILL we do?  Here is my recommendation

Yes, things may take longer to resolve initially – but you must be disciplined if you want to stop getting sucked into “reverse delegation.” Push back, and tell your people to go away and present their issues to you in this manner until it becomes their new default behavior.

In effect, you are now learning to delegate more effectively.  You GROW your people by making these situations a valuable coaching opportunity – with the intent to teach your team how to problem solve and make great decisions without you needing to be there all the time.

Simple, but you can see how it would be effective.

Till next time.

Go the All Blacks!

Hard to believe six weeks of fantastic sport are almost over. The wait for the Rugby World Cup seemed so long and now we have the final being played tonight at Eden Park. I still remember the building excitement and euphoria of the first world cup in 1987, and the subsequent bitterness of defeat in the cups since. I never want to be a “good loser”, but I do feel better equipped to congratulate the competition when they win. I hope this finely honed skill is not required tonight!

A personal gripe of this World Cup is the number of people out there whinging about how bad things are (Canterbury Earthquakes, Rena grounding, PSA, Global Financial Crisis, child poverty, etc.) and how we should be ashamed of being so focused on a sporting event. Without the richness of experience that sport and other pursuits give us we would all be lost in a cycle of continuing misery. I’ve always been a glass half full kind of person and while these events deeply sadden me, I would rather focus on the positives I see everywhere.

I’ve seen incredibly generous people opening their homes and wallets for those in need. I’ve seen friendly, passionate people enjoying sporting events with competitor supporters in a good natured way. I’ve seen gracious tourists who have taken the time to thank us for their experience, and promise to come back soon. And I am looking forward to a great final tonight!

On a business front, I read a report recently by myYardstick that based on surveys completed by over 1000 business owners across Australia and New Zealand, the biggest challenges currently facing small to medium enterprises include:

Issue/Challenge Percentage of Respondents
Funding 45%
Business Strategy 38%
Estate Planning 34%
Legal Affairs 34%
Succession 33%
Source: myYardstick Professional 2011

While I don’t think that the issues raised are new to business, the quantum would suggest that it’s still a struggle to run a business, and that business owners biggest need is to have a succinct plan on what they want to do and how they are going to do it. Not that great volume that is propping up a desk or bookshelf, but a practical document that conveys certainty and clarity for those charged to achieve success in the business.

So, are you developing the plan or implementing it?

Till post-RWC2011.

Lincoln

The Female Touch

Campbell Tyson Cooper White has been a bastion of male-ness for almost 90 years. Although our Team is mainly female (80%), all the Partners/Directors positions have been held by males. This has given the place a decidedly male feel to it. Until this year.

When Sarah Miskell was appointed Director in April this year, something changed. I can also say it changed for the better. Tanya Potter, our General Manager brought a female perspective to our Board Meetings, as well as to the implementation of our strategies at the coal face. However, there had not been the involvement of a female at Directorship level to give it the “full 360”. Sarah coming on board has changed this.

Sarah’s impact may not even always be direct. Having a female on the Board has, in my opinion, emboldened others to speak up. The decor has improved (the feminine touch has brought far more tasteful colours and decor), meetings have a more collaborative feeling, people seem more open in terms of their opinions and are welling to discuss and negotiate. It was not that this was lacking previously, it is more the amplification that has changed. There has also been a conscious effort to empower all staff which I think has also contributed to a great feel around the office. Our Teams are more sharing and collaborative in their approach, with a real ground-swell of concern and desire to help our clients as a Firm.

It really feels as though we are moving beyond being accountants, and becoming more holistic in the way we run our business and care for our clients.

Till next time.

Lincoln

Off the Radar

Accountants call it the silly season.  We’re in the middle of the busiest part of the year for Accountants.  Our clients have ordinarily got all their information together and are itching to know what the tax result was for the last year.  Its a trick to manage it so that clients are getting the information when they need it, but from experience I find that the best approach is to have up-to-date management systems that present the information to the decsion makers without waiting on an Accountant to put it together. 

There are some wonderful packages available out there now, like Xero (www.xero.com – a personal favourite), Banklink (www.banklink.co.nz – great, low cost cash flow management tool that covers GST to), Saasu (www.saasu.co.nz – Xero on steriods) as well as the good old MYOB (www.myob.co.nz).  One package I think is losing ground is Quickbooks (www.quicken.co.nz).  One of the more complex shrinkwrap options, their recent response to the GST changes has been rather poor.  Unless you want to bring your version up to the latest, you’re not supported at the 15% GST rate.  This lack of options strikes me as somewhat “don’t care” and heavy handed.  All of the other packages I have mentioned have rushed to find working solutions across the board.  Plus no word on a Saas solution, which appears to be where the other packages are all heading.

We’re running courses on GST changes and some of the other fun tax changes the Government bundled in to their 20 May 2010 budget.  Our next one is a breakfast function on 15 September 2010 at the Racetrack in Pukekohe.  Make sure you know what you need to do before 1 October rolls around.  Your financial well-being may depend on it!

Till next time.

Lincoln

Starting the ball rolling soon!

This is our brand new blog, and I’m looking forward to adding my first post very shortly, so watch this space! In the mean time, take a look at CTCW’s new look website.