THREE NEW CHARTERED

ACCOUNTANTS

We are very pleased to announce that Sara Lau, Michelle Kelly and

Natalie Tunnah can now put 'CA' after their names.

This is the culmination of six or seven years of study and specified

work experience. The study includes a Bachelor’s degree and a five

module post grad programme of professional study and exams.

Sara, Michelle and Natalie all hold senior roles at Shand Thomson

and will be known to many of you. Sara studied at the University of

Otago while Michelle and Natalie have both followed the ‘Earn while

you Learn’ pathway, working and studying part-time.

It was a pleasure to recognise their achievement recently and we are

looking forward to celebrating with them at the formal CAANZ

conferral function later on in May.

IN THIS ISSUE

+Changes to Vehicle

Rules

+Farm Worker

Accommodation

+2017 NSC Values

+KiwiSaver for Self-

Employed

+Paying Tax Online

+Anti Money Laundering

Legislation

+Deductibility of

Farmhouse Expenses

AUTUMN 2017

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SHAND THOMSON

NEWS VIEWS&

Accountants who know Agri business

While we believe the information in this

newsletter is accurate, it must of necessity be of a

general nature. We recommend that you obtain

specific advice on matters of concern to you, and

that you do not rely solely on this newsletter.

© Copyright 2017

CHANGES TO VEHICLE RULES nAmendments to the 5,000km method

Some small businesses make a claim for the business

use of a car on a per business km basis. This method

has been limited to 5,000 kms per year, however this stcap is removed for vehicles purchased after the 1

April 2017. The new method requires a record of your

total annual kms travelled in the vehicle each year as

well as the business % of kms travelled, determined

by a log book for 3 months, every 3 years.

The calculation uses a new ‘two tier ’ system as

follows:st

n1 10,000 total kms travelled for the year:stkms x business % x IRD 1 tier rate (72c)

nKms >10,000 for the year:ndkms x business % x 2 tier rate (25c)

This method is an option for businesses who do

not have their vehicle recorded in their asset

schedule and are not claiming depreciation.

nClose Companies

Close companies, those owned by fewer than 5

natural people, can now elect to treat new cars in

much the same way that sole traders and

partnerships do. This means that they can record

their car in the company asset schedule without

compulsorily having to comply with the FBT rules,

which require either paying FBT or doing a value of

benefit adjustment. Unfortunately this option

includes a requirement to apportion all company

interest too, so its application will be limited.

Where these new options affect you we will advise

you on the best choice for your circumstances.

N E W S & V I E W S PA G E 2

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It requires you to keep a vehicle logbook for three months

every three years to determine the business % kilometres

travelled. You may then calculate the tax claim using a new

'two tier' system:

nfor the first 10,000 kilometres, the rate is calculated on

the proportion of business use for the vehicle (say

60%) multiplied by Inland Revenue's first tier rate (for

example 72 cents/km but the IRD will advise the rates

each year);

nfor every kilometre after that, the rate is calculated on

proportion of business use for the vehicle (e.g. 60%)

multiplied by Inland Revenue's second tier rate (for

example 25 cents/km but again subject to change).

The 5,000 km limit has been removed.

nClose companies

Recently introduced legislation provides another option

for cars owned by close companies that are used by

shareholder employees. These companies - owned by

less than five natural people - can now elect to use the new

rules instead of paying FBT or doing a value of benefit

adjustment.

nWhat you need to do

If you operate as a partnership, sole trader, or close

company and are buying a new vehicle, record your

starting odometer reading. Diarise to do the same thing

next year. You want to be able to tell us the total number

of kilometres travelled in the tax year when you bring in styour records. And, sometime during the year starting 1

April 2017, keep a logbook for the new vehicle for a three-

month period to record business mileage.

If you're in any doubt as to whether this affects you, please

contact us.

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“Xxxxxxxxx.”

Dr. Seuss

TAX SNIPPETS

nThe application of use of money interest (UOMI)

to provisional tax payments has been significantly

relaxed. Companies and trusts will be treated in

the same way as natural persons and the

threshold for exposure to UOMI has been lifted

from $50,000 to $60,000. Further, where the

threshold is exceeded and provisional tax has

been calculated and paid using the standard uplift

method, taxpayers will only have UOMI apply rdfrom the 3 instalment date.

stnSince 1 April, contractors subject to the schedular

payment rules may elect their own withholding

rate. The schedular payment rules have also been

extended to contractors who work for labour-hire

firms.

nUOMI rates have been set at 1.02% for

overpayments and 8.22% for underpayments.

102 Clyde Street, P O Box 2, Balclutha, 9240

P 03-4180020 | F 03-4180026

th7 Floor, Westpac Building, George Street,

P O Box 5046, Moray Place, Dunedin, 9058

P 03-4741394

a c c o u n t a n t s @ s h a n d t h o m s o n . c o . n z

w w w . s h a n d t h o m s o n . c o . n z

STUDENT LOAN RATES

The student loan interest rate has decreased from

4.8% to 4.4%. Interest is applied to all student loans,

although New Zealand-based borrowers’ interest is

written off. The annual repayment threshold has

increased slightly from $19,084 to $19,136.

2017-18

FARM WORKER

ACCOMMODATIONFarm workers are often supplied houses as part of

their remuneration package. Although no rent

changes hands, the Residential Tenancies Act 1986

applies, and there must be a written tenancy

agreement. These are available from tenancy.govt.nz

The property must be maintained to a safe and

reasonable standard, with working smoke stalarms, and from 1 July 2019 it will also need to

be insulated.

You are required to monitor the property to

ensure that it is not contaminated with

methamphetamine (P). The Tenancy Tribunal

recommends that you test between tenants. You

may also include in the tenancy agreement a

provision to enable you to recoup costs if you can

show that through regular testing, on the balance

of probabilities the contamination was caused by

a particular tenant.

2017 NSC VALUES

The national standard costs for home bred or

raised livestock were released in late January.

Sheep

Rising 1 Year $32.20 3.9% á

Rising 2 Year $22.70 5.6% á

Beef Cattle

Rising 1 Year $343.80 6.5% á

Rising 2 Year $190.90 5.4% á

Dairy Cattle

Rising 1 Year $404.10 23.6% â

Rising 2 Year $322.50 22.1% â

Deer

Rising 1 Year $101.20 9.9% â

Rising 2 Year $49.90 5.7% â

N E W S & V I E W S PA G E 3

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Dr. Seuss

CHRISTMAS IS ALMOST HERE!

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EMPLOYMENT MATTERSstThe minimum wage increased from 1 April 2017. This is an increase of 3.2%.

per hour per 8 hour dayper 40 hour

week

per 80 hour

fortnight per year

Adult $15.75 $126.00 $630 $1,260 $32,760

New Entrant & Trainee $12.60 $100.80 $504 $1,008 $26,208

KIWISAVER FOR SELF-EMPLOYED

KiwiSaver is available to self employed persons

too and should be seriously considered as one

strand of ret irement planning given the

regulated fees and the government subsidy that

is available. The return on a contribution of $20

per week, or $1,040 per year, is excellent given

that this is enough to attract the full government

top up of $521.43 per year.

There is a lot of information about KiwiSaver

available online and www.kiwisaver.govt.nz is a

good place to start. Other websites that will help

DIY investors are www.sorted.govt.nz and

fundfinder.sorted.org.nz.

Alternatively, you can choose and contact a

p r o v i d e r f r o m t h e e x t e n s i v e l i s t a t

kiwisaver.govt.nz. We recommend this option as

the provider will help you make the best choice

about which type of fund is best for you based on

your personal situation, age, attitude to risk, and

your other assets, retirement goals and present

savings. It is important to get this right as it can

have a very material effect on the amount of your

fund at retirement.

NSC Values

The national standard costs for home bred or raised livestock were released in late January. For sheep, beef cattle and goats, the

figures indicate an increase of five to six per cent over last year. Pigs and deer have seen falls of between four to eight percent.

Dairy cattle have also fallen by ten per cent for purchased bobby calves and some 23% for rising one and two year stock. The latter

is an adjustment after the three years of large rises for two year stock, as grazing costs were incorporated to the formula used by

Inland Revenue.

DO YOU SUPPLY ACCOMMODATION TO YOUR STAFF?

Farm workers are often supplied houses as part of their

remuneration package. Although no rent changes

hands, you are subject to the Residential Tenancies Act

1986, and must have a written tenancy agreement.

These are available from tenancy.govt.nz

The property must be maintained to a safe and

reasonable standard, with working smoke alarms. stFrom 1 July 2019, it will also need to be insulated.

You are required to monitor the property to ensure

that it is not contaminated with methamphetamine

(P). The Tenancy Tribunal recommends that you

test between tenants. You may also include in the

tenancy agreement a provision to enable you to

recoup costs if you can show that through regular

testing, on the balance of probabilities the

contamination was caused by a particular tenant.

Type 1 Type 2

Electricity

& Rates

20% Claim

(previously 25%)

Home Office Claim

(previously 100%)

Fixed Line

Telephone

Charges

50% Claim

(previously 100%)

50% Claim

(previously 100%)

PAYING TAX ONLINE

Paying your taxes online can be quick and convenient

and it does avoid the timing uncertainties we now

have with the postal service. However, to make sure

your payments are processed successfully, it is very

important to ensure that you:

nUse the correct IRD number for each payment;

nSelect the right period or year;

nChoose the correct tax type:

nINC for income tax payments;

nGST for GST payments;

nDED for PAYE and KiwiSaver payments.

The correct tax year and type is shown on the tax

reminder letters that we send you.

Shand Thomson is on facebook.

Like our page to see what we’ve been up to.

EMPLOYMENT MATTERSstThe minimum wage increased from 1 April 2017.

The new hourly rates are $15.75 for adults and $12.60

for new entrants/trainees.

A trainee is a person aged 16 or more who is required

by his contract of service to undertake at least 60

credits a year of an industry training programme for

the purpose of becoming qualified for the occupation

to which the contract of service relates.

A new entrant is a worker who is 16 or 17 and who has

not completed 3 months or 200 hours of employment

(whichever is the shorter) and who is not supervising

or training other workers.

ANTI MONEY LAUNDERING LEGISLATION

Have you tried to open a bank account lately? The

additional red tape is caused by the anti money

laundering and countering of terrorism legislation

(AML), which requires banks to be certain of the

identities of the people opening and operating

accounts. The legislation currently applies to banks,

casinos and financial service providers, and soon will

extend to real estate agents, accountants, lawyers,

businesses that deal in expensive goods, and betting

on sports and racing.

You may have already been exposed to this through

some larger businesses already asking for copies of

trust deeds or financial statements - even though

you may have had an account with them for many

years. This is due to the need to gather the

information needed to satisfy the AML rules.

If you find this a step too far, we may be able to help as

we have had some success with providing the

necessary details in a letter from us as your

accountant.

“Sometimes the questions are complicated and

the answers are simple” Dr. Seuss

N E W S & V I E W S PA G E 4

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Dr. Seuss

CHRISTMAS IS ALMOST HERE!

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DEDUCTIBILITY OF

FARMHOUSE EXPENSES

The IRD have recently announced changes to the

longstanding “rule of thumb” deductions for farm

house expenses. Farmers have traditionally been

able to make claims that recognise the use of the

farm dwelling for business purposes. However the

prevalence of smaller holdings with high value

housing relative to the total value of the property,

and low farm income generation potential has led

to an IRD rethink of these standard rules. The

changes are meant to provide a more level playing

field by reducing the claimable portion of phone

and home running costs. For some farmers there

will also be a requirement to apportion rates and

interest costs.

The new interpretation classifies farms into two

categories- type 1 and type 2. The classification is

based on the value of the house and curtilage (the

section the house sits on) relative to the total value

of the farm:

Type 1: Value of farmhouse & curtilage is 20% or

less of total farm value

Type 2: Value of farmhouse & curtilage is more

than 20% of total farm value

Reasonable estimations of value must be used.

Options that are sanctioned are rateable value

coupled with a QV assessment of the value of the

dwelling & curtilage; bank values; and values

assessed by registered valuers.

For Type 1 farms the changes are:

Partnerships & Sole Traders:

Was Now

nphone rental 100% 50%

nelectricity, repairs, insurance 25% 20%

ninterest and rates 100% 100%

NSC Values

The national standard costs for home bred or raised livestock were released in late January. For sheep, beef cattle and goats, the

figures indicate an increase of five to six per cent over last year. Pigs and deer have seen falls of between four to eight percent.

Dairy cattle have also fallen by ten per cent for purchased bobby calves and some 23% for rising one and two year stock. The latter

is an adjustment after the three years of large rises for two year stock, as grazing costs were incorporated to the formula used by

Inland Revenue.

Companies & Trusts:

Was Now

nphone rental 100% 50%

nelectricity 25% 20%

ninterest, rates, repairs, insurance 100% 100%

There is a requirement for companies and trusts to

charge shareholders/beneficiaries for the use of a

dwelling based on 80% (was 75%) of the market

rental value.

The changes for Type 2 farms are most significant.

Like Type 1 farms, regardless of entity structure,

phone rental is reduced to a 50% claim. All other

costs, including rates and interest, must be

apportioned on a home office % basis. This % is

based on the area set aside as a home office as a % of

total area of the farm dwelling. If an area is dual

purpose it is also adjusted by the % of time it is used

as a home office/place of work.

2 For example, a dining room and kitchen make up 40 m of total, 2 total house area is 148 m equals 27%. Fair and reasonable

estimate of time used for farm business is 20%, therefore home

office claim is 27% x 20% = 5.4%.

However, a Type 2 farm which is owned by a

company or trust will be able to claim all interest,

insurance, repairs and rates, but this will be in

conjunction with a market rental adjustment that is

based on the defined private element of the house -

generally 100% less the home office %; so 94.6% in

our example above. House electricity claims will be

limited to the home office %: 5.4% in our example.

These changes will be effective from the start of the st2018 financial year, so 1 June 2017 for May balance

st dates and 1 July 2017 for June balance dates.

102 Clyde Street, P O Box 2, Balclutha, 9240

P 03-4180020 | F 03-4180026

th7 Floor, Westpac Building, George Street,

P O Box 5046, Moray Place, Dunedin, 9058

P 03-4741394

a c c o u n t a n t s @ s h a n d t h o m s o n . c o . n z