JULY NEWSLETTER

Welcome to our new Website

We're thrilled to announce the launch of our new interactive web practice at www.jdw.co.nz, where we can now provide you with additional services.
Our aim is to make better use of your time and keep you up to date on matters affecting your business and family life.

For example, you can now keep abreast of all the important dates and deadlines on our Key Dates section, or check out the Tax Facts section for quick reference on tax requirements.
In addition, our web practice offers you interactive services. Click here for Key Dates 

If you have run out of time during normal business hours to call us for an appointment you can now schedule an appointment using our special online form. You can access this form any time of the day or night and with the easy to follow instructions, you will find it a quick and simple way to request an appointment time. Click here to book an appointment

As we respond to feedback from you and our other clients, we will continue to add further information and interactive services to our website.

If you have any questions, comments, suggestions, please don't hesitate to contact us on 579 7096 at any time. We look forward to hearing from you.

The following amounts will now need to be included when calculating a person’s income for family assistance purposes:

• The income of a trust of which the person is a settlor (certain trusts are excluded, but income of a generic family trust will be caught), and income of a company of which that trust (and an associated person) holds 50% or more of the shares. In this situation the attributed income of the company is calculated based on the trust’s proportionate shareholding in the company. The amounts attributed are reduced if the trust or company has either distributed its income or paid a dividend, respectively.  If there is more than one company, the net income of each company is calculated and attributed separately and if one company has incurred a loss, the loss cannot be offset against the profits of other companies,
• The taxable value of fringe benefits attributable to a person who (including associated persons) holds 50% or more of the shares in a company,
• Total passive income over $500 derived by dependent children such as interest, dividends, royalties and rent,
• Portfolio Investment Entity (PIE) income where the income is not locked in until retirement,
• 50% of certain pensions and annuities that are treated as exempt income,
• Foreign sourced income of a person’s non-resident spouse,
• Tax exempt salary and wages such as those from specific international agreements e.g. salaries received from employees of the United Nations,
• Deposits paid to the main ‘Income Equalisation Scheme’ (for income from farming, fishing or forestry). Deposits captured include those made by the person and companies and trusts that meet the above requirements for family scheme income. Conversely refunds from the scheme are excluded,
• A further catch all provision has been introduced to capture additional payments received by a person that are used to replace lost or diminished income or meet the living expenses of the person’s family if the total of the amounts received exceed $5,000. For example, if a person’s parents pay his/her family’s utilities bills each month and the amounts total more than $5,000 per year, then that total amount is included as income.

It is important that families who are currently receiving WFF payments review all sources of their income and contact Inland Revenue to ensure they are receiving the correct level of benefit.

The new Employment Relations Amendment Act 2010, which came into effect on 1 April 2011, extended the 90-day trial period to all employers; prior to the amendment only those with fewer than 20 staff qualified.

The Employment Relations Act legislation requires that in order for a trial period provision in an employment agreement to be valid, the agreement must be in writing and state:

• that it is for a specific period not exceeding 90 days starting at the beginning of the employment, and
• that during the period the employer may dismiss the employee, and

• if the employee is dismissed they are not entitled to bring a personal grievance or other legal proceedings in respect of the dismissal.

If any of these elements are missing the trial period is not valid. In addition, the trial period provision provides that the employee has not previously been employed by the employer.

Since the enactment of the trial period provision, there have been several cases heard through the employment courts that give some clarity of interpretation of this legislation.

In Parkes v Squires Manufacturing Ltd, a recent personal grievance case, the employee received her employment agreement before starting work and signed it at lunchtime on her first day of work. The employer signed it a week later. The Employment Authority found that, as the employee had already started before signing the agreement, the trial period clause was not valid.

In Smith v Stokes Valley Pharmacy (2009) Limited, the Employment Court tested the 90-day trial period and applied a very rigid interpretation, which now provides the ground rules for employers. The court concluded that the employment agreement must include the trial period provisions (as stated above) and must be signed by both parties before the commencement of the employment.

It was also concluded in the Smith v Stokes Valley Pharmacy case that although the employee cannot claim wrongful dismissal, they are still entitled to the protection of the good faith provisions of the Employment Relations Act. These require the employer and employee to be communicative and responsive in their relationship. The employer is not required to give reasons for the dismissal in writing but they are required to give the employee feedback so that they can learn from the unsuccessful trial and hopefully have greater success with their next role.

The Judge also looked at the issue of notice with respect to the trial period and concluded that notice can be given during the 90-day period for the employment to terminate after the 90 days. However, in the event of an unsuccessful trial there is no provision for ‘payment in lieu of notice’ or ‘termination without notice’. Thus the notice period must be worked out, unless the parties agree to it being paid in lieu at the time that the employee is given notice.

In essence, the trial period provides a level of protection if you have sincerely endeavoured to meet the standards expected of a “fair and reasonable” employer.

Currently, if a business makes a donation of trading stock, it is deemed to be sold for market value and tax is payable accordingly. To support businesses who have or wish to make donations in support of the victims of the Christchurch earthquakes, the Government has introduced draft legislation exempting donations of trading stock from this market value rule.

The draft legislation provides disposals of trading stock will be exempt if it has been disposed of:
to an unassociated person,
for the purpose of relief from the adverse effects of a Canterbury earthquake, and

• the donation is made between 4 September 2010 and 31 March 2012.

A similar exclusion from gift duty has also been included in the draft legislation.

Gifting to Trusts

The law is to change regarding gifting, currently limited to $27,000 each annually.  From 1 October 2011 there is no gift duty payable on gifts, and no limit on the amount of the gifts.

We will inform you regarding gifting over the remaining balance, which can be done after 1st October 2011.

In some rare circumstances, where the settler is not a beneficiary, it may make sense to not gift all or part of the balance owing by the trust. 

The Inland Revenue has revised the motor vehicle mileage rate to keep up with increasing fuel prices. The mileage rate has recently been amended to 74 cents per kilometre for the 2010/11 income year i.e. from 1 April 2010 for taxpayers with a 31 March balance date.

All information in this newsletter is to the best of the authors' knowledge true and accurate.  No liability is assumed by the authors, or publishers, for any losses suffered by any person relying directly or indirectly upon this newsletter. It is recommended that clients should consult a senior representative of the firm before acting upon this information.