Accounting and tax services for Trusts

Gerard Business Accounting, Tax Accounting August 28, 2017accountant services, accountants south auckland, accounting and tax services

Why do we prepare annual financial statements for Trusts and is it really necessary?

Here at Citywide Accountants Ltd we manage accounting and reporting requirements for different types of trusts as part of our accounting and tax services.

There are different reasons for establishing trusts, some for charitable purposes and some for trading purposes to separate personal assets from business risk.
A common question is whether it is necessary to prepare annual financial statements for a Trust. As an accountant working within this sector, the simple answer is yes.

Trading trusts (also called private trusts) have become progressively common practice. Initially typically established by farmers protecting their land and latterly more popular among business owners to establish separation between personal assets and business enterprise. Families have also opted for private trust for personal reasons, not least to initiate a process whereby income can be split between parties for tax purposes.

Currently New Zealand requirements dictate that private trusts currently have no statutory financial reporting obligations. Notwithstanding, there is a practical responsibility on the part of trustees to prepare annual financial statements. The purpose of these statements is to report the assets held and financial performance of the Trust, as well as to report on distributions to beneficiaries. The act of preparing the statements establishes and validates the existence of the trust and evidences that the assets are complete and separate from the private assets of the trustees. This is a very important part of the process.

When filing tax obligations, it is necessary that private trusts prepare annual financial statements.

It is a fundamental duty when accounting to beneficiaries of a Trust to provide up to date financial knowledge of the Trust’s affairs. Tax obligations can only be identified and satisfied once the financial position of the Trust has been established. It is obvious accounting and tax services are important when it comes to trusts.

Call us on 09 266 8379 if you would like more information

Citywide Accountants Auckland: Deductible Business Expenses

Gerard Business Accounting August 9, 2017August 17, 2017accountants auckland, accounting for small business, gst calculator

What qualifies as a business expense?

You can claim a wide range of the expenses incurred as a result of operating your business, provided you keep sufficient records during the year. In this article we will try to give you an overview of the most common expenses you will incur and therefore need to be a part of your small business accounting.

1. Mileage Rate/Motor Vehicle

An employer can claim the cost of reimbursing an employee when they use their private vehicle for work. If you are self-employed, you can claim the cost of using your motor vehicle for business purposes. A logbook must be kept for a three month term to record business and non-business use. This must be done every three years, or if you change vehicle or type of business.
When a company owns a car, it claims all the expenses without making a private use adjustment. However, there may be a fringe benefit calculation necessary if the vehicle is made available for private use.

2. Use of Home

If you have an area set aside in the family home for work purposes, you are able to make a claim for that portion of the household expenses. The area set aside must be used principally for business use such as an office or for storage of stock and vehicle and must keep records of the expenses to claim.

Expenses include:
 Repairs and maintenance
 Rates
 Insurance (house and contents)
 Power
 Gas
 Mortgage interest
 Monthly monitoring charges of your security system
 Depreciation on capital items used in the home for business purposes (eg: computer, office furniture and fittings, shelving)
 Rubbish disposal
 Rent of the premises (if you rent rather than own) – please note that mortgage interest and rates are not applicable.

3. Home Telephone

If your home is the centre of operations for the business, you may claim a deduction of 50% of the residential line rental. In addition, you may identify and claim the business related toll/mobile calls.
If you have a separate commercial and residential line rental, you can claim the full cost of the commercial line but none of the residential line. You can also claim 100% of cell phone and internet costs if they are for business use.

Call your accountants in Auckland for more details on: 09 266 8379

4. Travel Expenses

A deduction is allowed for work-related travel including:
 Travel between business places
 Travel overseas
 Travel to acquire plant (which may be treated as capital and added to cost of plant)
A deduction is not allowed for travel between your home and usual place of business, unless your home is used as a work base.

The best way to ensure you have sufficient evidence of the business relationship is to make record of the nature of the trip and its relationship to your business. Keeping a diary is one way of doing this.
Claimable costs include:
 Air travel tickets
 Bus tickets
 Train tickets
 Taxi fares
 Car hire
 Accommodation
 Meals
 Incidentals

Overseas Travel

To ensure the highest level of deductibility (it may be necessary to split costs between personal/business), keep a record of:
 Letters of introduction
 Business contacts/cards
 Firms visited
 Business conducted
 Any diversion for personal purpose
 All items of expenditure
 (Please note – no GST will be claimable)
An itinerary of your trip may help to establish what percentage of travel was for business use.

5. Rent and associated costs

If you pay rent for your business premises you should also claim power, phone and any other expenses related to the premises.

6. Business supplies

Including stock purchases, raw materials, stationery and office supplies, cost of repairs to business fixed assets or premises, replacement of small asset items under $500+GST.

7. Entertainment

50% claim
100% claim
FBT payable
Staff Xmas party costs
Gifts for NZ clients
Business lunches in NZ
Morning tea provided on employers premises for all employees
Transport costs for employees to attend staff Xmas party
Entertainment consumed overseas
Gifts to staff
Light meals provided to employees at lunchtime meetings
Friday night drinks for employees
Sales staff meal costs while out of town
Corporate box/season pass
Subscriptions to sporting clubs

Contact us at Citywide Accountants Auckland for more information!

8. Premiums and levies

Business insurance on:
 Building and contents for the business premises
 Business assets
 Business protection
 Accident compensation levies
 Income protection may be deductible, if the benefit is taxable
Please note – life and health insurances are not deductible.

9. Wages paid to employees

Wages paid to shareholders where PAYE has been deducted and declared to IRD; this does not include drawings.

10. Subcontractors

11. FBT paid by Companies

12. Fixed Assets Items over $500+GST are capitalised then depreciated.

This spreads the cost of the asset over an estimated life of the asset. The depreciation is then claimed on an annual basis. Buildings are no longer depreciable but the chattels in the building are. Please keep a separate list so that the maximum depreciation can be claimed. There is depreciation allowed on the fitout of a commercial building.

13. Professional fees

These include accountancy, legal (in most circumstances), consultancy and management.

14. Personnel costs

These include training, seminars, protective clothing, branded uniforms and dry cleaning expenses for protective clothing/branded uniform.

15. Miscellaneous costs

These can include:
 Subscriptions
 Advertising
 Bank charges
 Finance charges re business loans or hire purchases
 Hire of equipment
 Interest (bank, hire purchase, loans)
Please note – this is not a complete list of all expenses claimable in all circumstances. There will be some costs claimable only for some businesses in some circumstances.

Please feel free to discuss with us, particularly prior to the purchase of major expenditure.

For New Zealand wide accountant services, CONTACT US!

Rental Property Accounting

Gerard Property Accounting August 8, 2017August 17, 2017accountants manukau, property accountants auckland, rental property accounting

Rental Property Accounting: Good Practice

1. Keep a separate bank account for the rentals. Provide Bank Statements for the rental account for 1 April to 31 March each year. Having copies of the loan statements for any debt on the properties for the financial year is also needed to make sure you have sound Rental Property Accounting.
2. Bank receipts intact for the rentals into the bank account.
3. Costs relating for the rental business should be paid out of this bank account. Money you take out for personal use should be coded to drawings. Wherever possible, items of ordinary personal expenditure should not come out of this account as they are not a deductible expense for tax.
4. Create an East light file and put invoices and receipts in it in date order, divided by months, latest on top. This ensures that invoices can be easily reviewed when tax returns are prepared.
5. Home Office – if you are paying rent or mortgage interest on your personal home, any area set aside for business use MAY be claimed as a proportion over the total area of the house.
For example: If 10% of the house is used for business, 10% of the relevant costs are claimable. Keep invoices in the file so they can be claimed. Items claimable include:

Rent
Water Rates
Power
Home and contents Insurance
Interest (if applicable)
Land Rates (If applicable)

6. Phone/Internet costs
Landline, internet and mobile phone costs that relate to business use can be claimed. Generally, for a small business 25% is able to be claimed without issue, more if it justified. However, this needs to be discussed and considered to ensure the claim is an accurate representation of the actual business cost.
7. Petrol and motor vehicle costs
Please keep a log book of travel for at the rental property. If you are inspecting the properties or need to visit the tenants to do repairs, then this travel may be considered as an expense of running the business. For example: If you need to travel to a hardware store to pick up items for repairs, this is also business travel. Each year the total kilometres of business travel are calculated and claimed using mileage rates as allowed by the Inland Revenue Department.
8. Generally business entertainment is 50% deductible. Record the name of the person and relationship on the invoice as you go along to substantiate the claim as part of your Rental Property Accounting.

Please contact us if you have any questions!