Baker Tilly Staples Rodway Numbers Magazine Spring 2019

Numbers

BAKER TILLY STAPLES RODWAY MAGAZINE

ISSUE 51 SPRING 2019

Property and profit

Inside The fundamentals of property investment Tax pitfalls of short term stays Investing in commercial property Property as part of a diversified portfolio Residential rental losses restricted Signature Homes profile

DIRECTORS Auckland

David Searle

(09) 373 1128

Hamilton

David Heald

(07) 834 6801

Tauranga

Chris Downey (07) 578 2989

Hawkes Bay

Dave Sawers

(06) 878 7004

Taranaki

Chris Lynch

(06) 757 3155

Wellington

David Hulston (04) 472 7919

Christchurch

Dave McCone (03) 343 0599

DISCLAIMER No liability is assumed by Baker Tilly Staples Rodway for any losses suffered by any person relying directly or indirectly upon any article within this document. It is recommended that you consult your advisor before acting on this information.

02 Numbers ¡ Spring 2019

A look inside this issue of Numbers...

04 Property Investment The fundamentals

08 Commercial property Not for the faint-hearted

12 Property as part of a diversified portfolio 14 Signature Homes Building a winning business

18 Residential rental losses Now restricted

20 Ask an expert GST & property

22 Tax pitfalls Airbnb, boarders and short-stays

26 Microsoft Project Simple tips for newbies

30 It's official The new Trusts Act 2019

34 Non-resident directors’ fees & withholding Inland Revenue provides some guidance

36 Incorporated societies Change is on its way

40

Women in Business Hannah Mellsop of Real Rad Food

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reat conversations, great G relationships, great futures Take a look at what we’ve been up to recently

03

Property Investment The fundamentals As accountants, we are often asked by clients whether they should invest in property. Over the last two years, this question has come up more regularly as people come to grips with a low interest rate environment and the difficulty of achieving a reasonable return on financial investments.

STORY Philip Macey Director Baker Tilly Staples Rodway Taranaki

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While there are numerous articles out there that can guide prospective buyers towards the expected financial returns and tax implications, many steer away from the more practical issues surrounding purchasing and maintaining a property.

So, here are a few pointers that may help in any decision-making process.

Don’t be frightened of taxes and love cashflow!

You only pay tax when you make money, so in that way tax is a good thing. However, paying more tax than required is not good! The last few years have seen significant changes to the rules around residential property investment and the most recent – ring-fencing of losses (discussed elsewhere in this issue), is potentially the worst for investors. Offsetting rental losses against salary and wages for most ‘ma & pa’ investors has in the past been a key part of any investment strategy.

But, let’s be brutally honest, in today’s market of low interest rates and (generally) high rental returns, if you cannot make both a cash and a tax profit on your rental property then your investment needs restructuring.

From my experience, the most successful property investors are those that ensure every property generates a net cash return after expenses, which is then reinvested back into the property or debt repayment. Those that own negatively geared properties have been unable to grow their portfolio.

Investors need to understand that as they repay debt, with most loan structures, over time, the interest cost reduces, but the loan Numbers · Spring 2019

payments stay the same. As a result, there is a higher taxable income, but the same pre-tax cash flow. When you are then required to pay tax on your income, it can significantly impact cash flow. I call this the year five effect. Why? Because most investors complete a 5-year cash flow to determine whether they can afford a property. But it is after year five that the above starts to impact significantly and so we recommend that you always prepare at least a 10-year cash flow.

Do you know what your long-term goal is?

It goes without saying that unless you are trading property, any property investment will be a long term one. You need to ensure that this investment aligns with where you will be in 20 years, not just where you are now.

Often, we see clients invest in a property, only to have to sell it a few years later as their situation changes e.g. shifting jobs, having children, aging parents’ needs, etc. In the past there was potentially a capital gain that was made when the property was sold. However, in today’s market and tax regime, gains cannot be guaranteed, and tax may also apply (mainly via the 5 year brightline test).

We encourage clients to think backwards when investing long term in property. Determining your cash flow requirements in 10 years will help you determine the rate and loan structure you need to put into place now in order to set yourself up for the future. Too many property investors structure their borrowings on the maximum the bank will lend and the minimum repayments the bank requires, rather than what is the best for their situation.

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Should you own the property your business operates from?

This is a commonly asked question and one that really depends on individual circumstances. As a guide for a new business that plans for growth, it is often better to rent than to own. The reason? Rather than having funds invested in property, they may be better invested in working capital that will assist in business growth. This is assuming the net return of the business is greater than the net growth in the value of the property.

For mature businesses with consistent results, owning your own premises makes good sense, as who could be a better tenant?

However, be aware we often see owners over-capitalise a property in this scenario, as they make decisions that suit an owner, not a tenant. These funds are often not recovered in a subsequent property sale.

Beware too that in this scenario your business may be your only source of income.

If it suffers a downturn, then not only do you have a business to turnaround, but you have a property investment at risk. Always set this type of investment up to sell. Owning in a separate entity, establishing market rents and having formal lease agreements means you have established a marketable property that could be sold, should your investment funds be required elsewhere.

Do you invest with others?

Investing with others is a great way to enable purchasing a property that could otherwise not be affordable. But it has its pitfalls. Firstly, 06

knowing your own long-term goals is hard enough, but ensuring those you invest with have similar and aligned goals is difficult. If they are not aligned or their personal situation changes at some stage, the investment could be impacted.

Regardless of the relationship with these other investors – family, business associates or friends, we recommend that a Heads of Agreement is drafted and signed by all parties. While for the most part not legally enforceable, it is always worthwhile clearly documenting the intended structure, duration, funding, ownership rights and expected cash flow of the investment up-front. This should also include processes for the exit of one party, and on winding up the investment.

Beware that if funding is required for a purchase, you will need to carefully review and seek legal advice regarding liability, should there be a default on the loan for some reason. All institutions will seek cross guarantees from all parties or may limit funding depending on the various investors’ personal situations.

Commercial or residential?

This is one of the most common questions we see now, given the recent increase in legislation around control of the quality of residential rental property. Generally, I advise clients to treat both the same – as an investment. It does not matter what type of rental it is; just that it generates a suitable return.

Commercial properties usually offer longer-term tenants, who sign for long periods.

Conversely, the properties typically take longer to find suitable tenants than residenNumbers · Spring 2019

IRD NUMBERS TO BE DISCLOSED ON ALL PROPERTY TRANSACTIONS tial properties. In both instances, you need to do due diligence on the prospective tenants to ensure they can manage the rent payments and will look after your properties.

Commercial tenants are responsible for most outgoings of a property and often carry out significant work to the property to make it fit for their own purpose. But beware, at the end of the tenancy, the property needs to be let again. You will need to ensure that you have the power to ensure that, if required, they return any alterations to their original state. For a comprehensive analysis, see the article Commercial property, not for the faint-hearted on page 8.

In summary, the best advice for anyone investing in property is always: • Seek out the best quality property you can afford.

• Know what your end goal is.

• Know what your expected return is.

• Select your tenants, don’t let them select you. philip.macey@bakertillysr.nz Philip is a director at Baker Tilly Staples Rodway Taranaki. He is also an independent director on a large property investment company and advises clients on long term strategy for both business and property.

The information given in this article is general advice only and should not be relied upon, as specific circumstances can vary. Please contact your usual Baker Tilly Staples Rodway advisor for assistance.

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Most property transactions require the buyer and seller to complete a form disclosing their IRD number, under rules that came in with the introduction of the bright-line test.

However, people saying they are purchasing property to use as their main home are not currently required to disclose their IRD number. With effect from 1 January 2020 virtually all land transactions will require the buyer and seller to disclose their IRD number, regardless of the use they will be making of the property. They will also need to disclose if they are using the property as their main home. Non-residents will be required to disclose their foreign tax identification number and their country of tax residence. This is designed to capture land speculators who are avoiding tax and was recommendation number 99 of the Tax Working Group.

The Minister of Revenue also commented that: “Capturing the relevant tax information for property sales will also help us work with jurisdictions in other countries to combat global tax evasion.”

Inland Revenue will soon have a significant amount of data regarding land in New Zealand and who holds it.

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Commercial property Not for the faint-hearted With the official cash rate at record lows, residential growth sluggish and eighty per cent of 2019’s NBR Rich List Top 20 having made their money in bricks and mortar, many clients are looking seriously toward commercial property as a place to invest.

Photos by Simone Hutsch on Unsplash

STORY Kaison Chang & Peter Guise Directors Baker Tilly Staples Rodway Auckland

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Commercial property may look attractive now, but those who remember boarded and empty shops following the 2008 recession will understandably be hesitant. So, before you dive headfirst into unchartered territory, it pays to know what to look for and be aware of the risks.

What are my options?

There are many choices when it comes to commercial property, but it starts with deciding what kind of commercial property best suits your needs. The main choices in New Zealand are industrial, retail and office.

Industrial Real estate used for industrial purposes and includes warehouses, factories, and distribution centres.

Retail Presents a broad range of options and includes shops and restaurants from single occupancy buildings right the way through to large shopping malls Office Office buildings range from small buildings in the suburbs right the way through to skyscrapers in the central business district The quality of each category varies widely, and this has a significant effect on the ability to attract quality long-term tenants.

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What are the most important things to consider?

There are three primary considerations when you are looking to buy commercial property: Tenants The person, organisation or organisations that occupy your land and/or property. It is worth considering whether they are a stable, long-term business that can service the rental payments without difficulty, and are happy that the property suits their current and future needs.

Yield The expected annual return as a percentage of the property’s value. This is often dependent on the quality of the property and location.

Location Where the property is situated, including city/suburb, access to transport, markets and zoning.

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What should I look out for?

Leasehold Land values go up; building values go down. If you can’t participate in the value of land increasing because it is leasehold, this removes a major attraction of property investment, and you are at the mercy of the landowner increasing lease costs. Our advice would be to avoid buying on leasehold land.

Developments Future local plans can have very positive outcomes if a new development is planned with ample transport and auxiliary services, but if your new building is in a town that is about to be by-passed by a new highway, you will be very grateful that you invested in some due diligence.

Building quality In general, what you are looking for is that a property that is at least a 67% NBS (New Building Standard). Specific things to look for include asbestos, earthquake-prone buildings and historic protections. While an old building can provide great opportunities for a change of use, they can also cause a significant hole in your pocket when changes cannot be made because they are historically protected or need to be vacated for costly earthquake protection.

At present earthquake strengthening costs are non-deductible for tax, although this is under review. The tax treatment of other repairs or upgrades will depend on the extent of the work.

Hidden annual costs Most leases are net, leaving the cost of rates, services and maintenance in the hands of the lessee. However, this is not true for all locations and cases. An example of this is Wellington, where some leases are gross leases, which leases include insurance, rates maintenance and other costs, which adds a high cost for the owner compared with other locations.

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Potential Some buildings may have the opportunity of changing their use to increase returns by being refurbished or going through a new fit-out. While this is a cost, a payback calculation should be performed to see if it is worthwhile in the long run.

This may be based on being able to increase the rent to the existing tenant or acknowledging that new tenants will be needed to better match the new building function or higher specifications.

Tenant quality For an acquisition that includes an existing tenant, it pays to include an assessment of your current tenant’s business future and any red flags that could cause damage to property that cannot be recovered. Commercial leases are longer in duration than residential property, and when taking on new tenants, due diligence is important in protecting your investment, including at acquisition time.

What should I look for in the existing tenancy agreement?

Key considerations include: • The length of the lease.

• Outgoings for building maintenance should be covered by the lessee.

• Regularity of rent reviews.

• A CPI (Consumers Price Index) clause in the rent review.

• A ratchet clause – even if the current rental is assessed to be higher than the market rent, the rent payable cannot go below

either the current rent (hard rachet) or the value at the commencement or lease renewal date (soft rachet).

• A make good clause at the end of the lease.

What return should I be making?

Your yield should be above the interest rate both on any money borrowed and where your money could be otherwise invested. The yield on commercial property has been declining over time, although the recent slowdown in property price increases is likely to reverse this.

Commercial property is not for the faint-hearted and, as with all investments, a diversified portfolio is important to preserving your wealth.

You may not have a large amount to invest, be unwilling to take the risk of investing in one property or want to avoid the stress of managing your own property investment. A less risky approach worth considering is investing in the listed commercial property stocks, which spreads the risk and are easily realisable.

If you would like to know more about commercial property investment options, check out the article Listed Property Trusts and Syndicated Property in the Winter 2017 issue of Numbers. kaison.chang@bakertillysr.nz peter.guise@bakertillysr.nz The information given in this article is general advice only and should not be relied upon, as specific circumstances can vary. Please contact your usual Baker Tilly Staples Rodway advisor for assistance.

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Property as part of a diversified portfolio Unless you have only invested in term deposits, you have probably had some experience or knowledge that most non-bank investments provide higher returns over time with the trade-off being occasional swings in value.

The degree of variation depends on the type and mix of your investments. The key to achieving more consistent growth is by holding a diversified portfolio of assets, such as fixed-income investments, shares and property.

STORY Will Roberts FANZ Private Wealth

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The concept behind a diversified investment portfolio is that each type of asset will perform slightly differently at a single point in time helping to smooth returns. Further to this, diversification within each type of asset is important as different industries or properties can perform differently over the same period of time. A classic example given by investment advisers is that of the ice cream seller and the umbrella seller. One prefers sunny days, while the other rainy days. By owning shares in both, you have lowered the influence that weather has on the performance of your investments.

Property is one of those investments that adds value to an investment portfolio, although it’s important to understand the different ways you can gain exposure to the New Zealand property market, and what those options mean for you in terms of the risk and returns.

The most well-known form of investment in property is via direct investment in residential property. For larger investors, they may also hold commercial property. The attraction of direct property investment for many people is that it’s a physical thing that can be viewed and utilised, i.e. you own ‘bricks and mortar’. Equally, property is an asset that can be borrowed against and in times when it’s appreciating, your returns are enhanced (both positive and negative) by using the bank’s money to finance your ownership.

What few people appreciate is that you can gain high-quality exposure to commercial and industrial property through the share market and managed funds in both large and small quantities, although the ability to borrow against these types of investments may be less than with direct investments.

The New Zealand share market includes a number of property investment opportunities covering a range of property types. The characteristics are very similar to direct property ownership, i.e. income through rents and leases (paid as dividends or other distribution), and returns are equally enhanced by a Numbers · Spring 2019

degree of bank debt within the investment vehicle. The key difference is the liquidity of these investments as your ‘share’ of ownership can be sold at any point in time for a minimal brokerage cost. Most of the options are also structured to be tax-efficient for investors through a PIE structure. The risks remain similar though; mainly from low occupancy and rising interest rates.

This is where the merits of diversification come in. It is not currently possible to get direct exposure to the residential property market through the share market, and the Auckland residential property market in 2019 has been sluggish as best. Contrast this with share market listed property companies where the average increase in 2019 has been over 20%! Without doubt, this has been an exceptional year so far and property investment hasn’t always favoured listed property, but those who were exposed to both residential investment and listed stocks will have benefitted from a more consistent result.

By extending this idea of being diversified beyond property, we can construct portfolios of investments that contain a degree of consistency and resilience, regardless of the economic environment. The key to a successful strategy is determining a level of return that reflects your ability to accept the risks that might exist. By engaging an adviser, investors develop a strategy with the appropriate level of risk and are more likely to achieve their objectives around long term investments, a comfortable retirement, and estate plans. will.roberts@sraminvest.co.nz FANZ Private Wealth is a boutique investment advisory service who specialise in providing personalised and impartial investment solutions for individuals and trusts.

Call 0800 727 2265 to contact an adviser.

FANZ Private Wealth is an operating division of Funds Administration New Zealand Limited (FANZ). FANZ is a subsidiary of SBS Bank which is a registered bank. Neither FANZ nor FANZ Private Wealth is a registered bank.

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Signature Homes Building a winning business Geoff Mockett and Dustine Palmer have learnt several lessons from their many years in business, but the most valuable has resulted in them being a multi-awardwinning Signature Homes franchise, ranked as the region’s leading home builder1.

STORY Sarah Ellem Baker Tilly Staples Rodway Taranaki

Many lessons have been learnt by Geoff Mockett and Dustine Palmer from their years in business. As a result, they have become a multi-award winning franchise, ranked as the region’s leading home builder.

So, what was the key lesson?

“We learnt early on that you have to surround yourself with exceptional people. Both in your own team, and those who support you,” explains Dustine.

The Taranaki Signature Homes team has won a host of awards within the franchise in both 2018 and 2019 – Franchise Partner, Show Home of the Year and Best Market 14

Share. They also won Best Client Experience in 2018 and Best Systems and Processes in 2019. At this rate, they’ll need to build an extra wall to hold all their certificates.

“Our team is exceptional at what they do, and we work together towards the same goals – from the front desk to our contractors on the tools, we’re all on the same page to ensure our clients get the best experience from us at every stage in the process,” says Geoff.

The couple has been the Taranaki franchise holder since 2004 when they moved their established building business under the Signature Homes umbrella. Looking to expand into the residential and light commercial space, Numbers · Spring 2019

Geoff Mockett and Dustine Palmer added to their trophy cabinet with multiple awards at the Signature Homes conference in August, including Franchise Partner of the Year.

Geoff and Dustine realised that to establish their own brand equity and consumer trust it would take at least five years, so becoming a franchise partner was the right move.

They met with Gavin Hunt, the owner of Signature Homes New Zealand. “He came down to Taranaki and had a chat with us, and we could see that the franchise was growing and the brand was becoming more trusted and recognised, and they had great systems and processes in place.

“You can’t be scared to change. To grow you often need to take a step back, look at where you are, and where you want to go to understand what is possible,” says Geoff.

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Geoff and Dustine talk a lot about people and opportunities. Their team, their contractors, the franchise group, and externally their three trusted and important external advisors: their bank, their lawyer, and their business advisor.

They affectionately refer to them as ‘the triangle’. As builders, it’s not a surprise they chose the triangle as the description of the people that provide such important support.

As the shape of trusses and gable ends the triangle is the strongest, most supportive geometric shape.

“We love working with Phil Macey at Baker Tilly Staples Rodway, he’s part of our team, and he has supported and guided us through 15

" We invest in our people and the culture of the business and we don’t shy away from celebrating our successes.”

GEOFF MOCKETT

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the good times and the challenging times.

When he came on board his advice and capabilities far exceeded what we knew to be best practice for accountants,” they state.

A while back when visiting their old accountant, they saw a bunch of IRD certificates on the wall and had a bit of an epiphany, realising that in a roundabout way they were effectively paying the taxman twice by accepting simple compliance services, delivered with no thought or planning, rather than receiving true business guidance.

“We’ve been in business since 1998 and have been through a couple of accountants.

Working with Phil is so different from what we knew before - he feels like a partner in

our business. He gives great advice, draws straightforward diagrams and we come away feeling more in control of the finances and understand how everything can and should be working,” they explain.

Dustine speaks passionately about the need for everyone involved in the business both internally and externally to be smarter than they, the owners, are in their area of expertise. They rely heavily on ‘the triangle’ to guide them; to provide a strong backbone to the business, but not in management. They know that their people and strong leadership are paramount to success. They take modern management strategies seriously, realising that to grow, the top-down approach doesn’t apply, and they need to get the best people performing each function well.

“You must have professionals in every role.

The days of trying to be the smartest in all things in the business have gone, and you must trust in people’s expertise.

“We have people in our team that could take over the business tomorrow and make it a huge success. We invest in our people and the culture of the business, and we don’t shy away from celebrating our successes.”

Geoff explains.

With all the recent accolades, there’s often cake in the tearoom, team outings and national recognition throughout the Signature Homes group. They strongly believe in their entire team and are clear that a successful business comes down to clear expectations, investing in the right people, seeking true business advisors to guide and mentor, and always looking forward.

“A successful business revolves around all its people – we know everyone says this, and it sounds a bit cheesy, but it’s absolutely true.” sarah.ellem@bakertillysr.nz 1N umber of New Plymouth District Council consents issued.

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Residential rental losses Now restricted As forewarned in our previous tax publications, the government has now passed the law which will restrict the use of losses from residential property.

These rules take effect from 1 April 2019, so apply from the current tax year.

STORY Mike Rudd Director Baker Tilly Staples Rodway Auckland

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What are the new rules?

The rules apply to ‘residential land’, using the same definition of ‘residential land’ already existing for the five-year brightline test (basically, land zoned residential or used for residential purposes).

The rules apply by default on a ‘portfolio basis’, allowing investors to offset losses from one residential property against income from other properties the investor also holds. However, the investor can elect to apply the rules on a property-by-property basis (this could be useful if the investor holds some property which may be taxable on disposal).

Losses from residential rental properties will be ‘ring-fenced’, carried forward to future income years, and will only be able to be offset against: • Residential rental income from future years; and • Taxable income (after deducting the cost of the property) on the sale of any residential land. The rules around this are complex and, in most cases, sales would not be taxable.

• If any losses remain, they are available to carry forward against residential property income from future purchases or under the bright-line test.

If the property is held by a company, the usual losses carry forward rules (being 49% shareholder continuity) must also be met to allow unused residential rental losses to be carried forward.

There are anti-avoidance rules that apply if someone has an interest expense for money they borrow to provide funds to a 'residential land-rich entity', being an entity where more than 50% of the Numbers · Spring 2019

assets by value are residential land.

Broadly, these loss ring-fencing rules apply to the interest deduction available to the owner of that land rich entity.

What is not caught?

The following situations are not caught by the new rules: • Residential land which is a person’s main home, or for property subject to the mixed-use asset rules (which have their own loss quarantining rules).

• Residential land held by a land developer for the purposes of developing or subdividing the land, or other land that is held on revenue account, and the person has notified Inland Revenue of this when they file the tax return for the year they acquire the land or, if they already hold the land, when they file their 2020 income tax return.

• Property that is accommodation provided to employees or other workers in all cases and, if the employee is associated with the employer, the accommodation is due to the nature or remoteness of the business.

• Property owned by ‘widely-held’ companies, as large companies often hold residential land incidentally to their business.

These rules underwent substantial revision as they passed through the law-making process, and there are some added complexities that apply now to interposed entities and residential portfolios that are made up of both taxable and non-taxable residential properties. mike.rudd@bakertillysr.nz 19

Photo: iStock.com/Marco Rosario Venturini Autieri

Ask an expert GST & property GST is a fantastic tax. In most situations, it is easy to comply with, it raises a lot of revenue, and is generally easy to understand.

However, in a small number of cases, GST gets very complicated. Property transactions are one such area. In this issue of Numbers, we take a slightly different approach, answering four commonly asked questions on GST and property.

STORY S ybrand van Schalkwyk Baker Tilly Staples Rodway Tauranga

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Photo: iStock.com/ DNY59

I have purchased a lifestyle block of bare land from a developer. The contract was inclusive of GST. I now want to build a dwelling for myself on the bare land.

Because I am living in my own house, does that mean I am outside the GST net?

The answer depends. If you are GST registered, and you acquired the property for making taxable supplies; for example, you are going to plant a Kiwifruit orchard on the land, then you will need to pay GST to the IRD on the portion of the land to be used for the dwelling. This is because you are taking part of the property out of the GST net, and that means you must pay the GST back. If you were not registered, nor required to be, then there should be no GST consequences. You would have paid GST at 15% on the purchase, so the property is entirely out of the GST net, and there is no need to pay GST when a part is used for private purposes.

The IRD has recently audited my accounts, and they are disallowing GST input claims for any tax invoices that do not have the exact name of my company on them. Can they do that? In many cases my name, or one of my other company’s names are on the invoice, but the costs were incurred for the company being audited.

The IRD will often try to deny GST claims where no valid tax invoice is held. A tax invoice is very specifically defined in the GST Act and must have the name of the purchaser on it.

However, the GST Act also allows one party to act as the agent of another and, if they do so, then the tax invoice is able to be made out in the name of the agent, but the principal is able to claim the GST back. So, in the case of disallowing claims, the IRD are both technically correct and incorrect. IRD have accepted that claims can be validly made in the agency type of situation. It pays to challenge them if they get too fussy about this.

I am GST registered, and I am purchasing land from someone who is also GST registered. The contract is expressed as “inclusive of GST”. I am going to use the property as part of my business, and the vendor has used the property entirely for their business, i.e. there is no dwelling. Can I claim 15% GST on the purchase?

The maximum GST you can claim is $0. Many clients assume that because the contract says that the price is GST inclusive, the price includes GST at 15%. Where a transaction including land is between two registered parties and the land is to be used in a GST registered business, the rate is reduced to 0%. Therefore, yes, you can claim GST, but at 0%, which is $0.

My bed and breakfast business turnover is more than $60,000. However, as this is the provision of accommodation, and GST does not apply to that, I don’t have to register for GST. Is that right?

Wrong. It is the supply of accommodation in a dwelling that is an exempt supply for GST purposes. For it to qualify as an exempt supply, the person living in the house must have quiet enjoyment (a legal term of art) of the property, among other things. Bed and breakfast guests do not generally have quiet enjoyment, and the supply, therefore, does not qualify as an exempt supply. sybrand.vanschalkwyk@bakertillysr.nz The above general advice only should not be relied upon as specific circumstances can vary. Please contact your usual Baker Tilly Staples Rodway advisor for assistance.

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Tax pitfalls Airbnb, boarders and short-stays With tightening rules on residential tenancies, people making greater use of flatmates and boarders to help pay the mortgage and the rise of apps such as Airbnb, it was only a matter of time before people would start querying their income tax and GST obligations around property that had previously not been used to derive income.

STORY Mike Rudd Director Baker Tilly Staples Rodway Auckland

Inland Revenue have recently released an overview of the tax implications of those providing accommodation, with useful guidance on the rules applying, all of which are subject to the home owner’s situation.

The main questions are whether standard cost determinations should be used and whether GST registration is required in relation to accommodation provided in private homes.

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Provision of accommodation in the taxpayer’s main home Inland Revenue has issued determinations for a ‘standard cost method’ for providers of private board and short-stay accommodation.

Where a provider meets the conditions, only income derived in excess of the standard cost calculation needs to be returned to Inland Revenue. The intention is that this reduces compliance costs for small-scale accommodation providers.

Numbers · Spring 2019

Photo by Owen Young on Unsplash

Standard costs are determined annually by the Inland Revenue based on the average annual cost of providing private board or short-stay accommodation.

Standard cost method for boarders From the 2020 income year, hosts providing private boarding service have the option to rely on Determination 19/01 to return income derived from the provision of boarding accommodation.

To apply the determination, the host must: Numbers · Spring 2019

• Be a natural person or persons (i.e. an individual/individuals); • Not have more than four boarders at the same time at any time during the income year; • Not provide private boarding as part of a GST taxable activity; and • Not rely on any other Inland Revenue determination in relation to the private board accommodation.

The standard cost method for private board accommodation is made of three elements which may be included: 23

• Weekly standard cost (per boarder); plus • Annual housing standard cost; plus • Annual transport standard cost (being transport used in providing boarding services) The weekly standard cost (per boarder) for the 2020 income year is $186.

The annual housing standard costs is calculated with reference to the cost of the property, any amounts received from boarders and the number of weeks the accommodation is provided. This varies depending on whether the house is owned or rented, so reference should be made to the determination (Google: “Determination 19/01”).

The transport standard costs are calculated based on the number of kilometres travelled using the kilometre rate published

by Inland Revenue.

Using this determination means that only weekly income from boarders to the extent it is higher than $186 plus the annual standard housing cost plus the annual transport standard cost per boarder is taxable.

Airbnb: Standard cost method for short-stay accommodation Determination 19/02 provides a similar standard cost method for hosts who provide short-stay accommodation to guests in their own home. Short-stay accommodation relates to accommodation provided to a person or group of persons for periods no longer than four consecutive weeks.

In order to use the standard cost method under this determination, the host must: • Be a natural person or persons (i.e. an individual/individuals); • Rent out a room (or rooms) in their home to guests for shortstay accommodation; • Not rent out rooms for more than 100 nights in an income year (counting each room that is rented out separately); • Not provide the short-stay accommodation as part of a GST taxable activity; and • Not rely on any other Inland Revenue determination in relation to the short-stay accommodation.

For the 2020 income year, the nightly standard cost method for short-stay accommodation provided is: • $50, where the host owns the property • $45, where the host rents the property.

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Actual costs Where accommodation is provided as a private boarding service or short-stay accommodation and the standard cost method cannot be used, actual results (income less expenditure) must be calculated and returned to Inland Revenue as taxable income.

This generally requires an apportionment of costs incurred to reflect the usage of the property in relation to the accommodation service provided and private use by the owner.

The ‘Mixed-Use Asset’ rules apply here, and care is required in the calculation.

GST registration The overview released by Inland Revenue also considers whether GST applies to the provision of short-stay accommodation.

GST does not apply to the provision of accommodation in a residential dwelling. However, short-stay accommodation (being accommodation provided for no more than four consecutive weeks) does not meet the definition of accommodation provided in a residential dwelling.

Therefore, where the amounts received from the supply of shortstay accommodation in any 12-month period exceed the GST registration threshold (NZ$60,000), the provider must register for and return GST to Inland Revenue.

Once in the GST net, input tax deductions would be available for costs incurred in supplying short-stay accommodation. This could include a second-hand goods credit, or GST paid, on the purchase price of a property, if it is owned.

Conversely, however, there may also be a GST liability when a provider ceases supply of short-stay accommodation, or the property is disposed of. Complex calculations may also be required where there the property is used for both short-stay accommodation and private use, so we recommend discussing with your Baker Tilly Staples Rodway advisor.

In an environment where letting out properties has been made easier through the growth of technology, it is essential cost-saving calculations made available by Inland Revenue are considered.

Conversely, it is equally important to ensure the liability for any applicable taxes (such as GST) are reviewed on an ongoing basis. mike.rudd@bakertillysr.nz If you require any assistance or further information, please contact your local Baker Tilly Staples Rodway advisor.

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Microsoft Project Simple tips for newbies Are you struggling to get your head around Microsoft Project? Working with Microsoft Project myself and training end-users, I have developed a list of things that help keep a project simple and a project plan effective.

STORY Rob McEwan Director Baker Tilly Staples Rodway Taranaki

Project managers that come to the position through education spend considerable lengths of time studying to do their job well and learn how to use Microsoft Project. Others, such as construction project managers, are often introduced to Microsoft Project when promoted to the role after building a career on the tools. For many, this is their first time using Microsoft Project, and they struggle to get their head around the application. Even after attending quite advanced training, they don’t always understand how to get the most basic schedule to behave itself within the software.

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Project plans have often been prepared by a predecessor, and without the more in-depth understanding of how Microsoft Project works, they feel like they are fighting the application to achieve a result that, in their own minds, can be managed much better on the back of an envelope.

Working with Microsoft Project myself and training end-users, I have developed a list of things that help keep a project simple and a project plan effective.

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What is Microsoft Project?

The best description that I’ve heard for Microsoft Project is Excel packaged for project professionals. In reality, the project file is a collection of worksheets. These worksheets have been defined with specific roles in mind. A sheet for tasks, a sheet for resources, sheets that define relationships between those tasks and resources. These are supported by a collection of forms, views and reports overlaid to assist the presentation of data stored within those core sheets.

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Within each of the sheets there are columns of data. Most columns have already been defined with the type of information required.

When you first open Microsoft Project, you’re presented with a Gantt chart view of a limited number of those columns. To really understand what’s happening inside Microsoft Project, you need to examine those columns and ensure the information entered into them, or calculated by them is what you need to manage the project effectively.

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Step 1

Step 2

Check the project information

Use sheets for data entry

Project files created for one project are often reused over and over again as a template for subsequent projects. I recently found a client’s project file where the project started in July 2019, but the project start date was set in 2013! This creates a situation where any new task which is not linked into the network defaults to the 2013 start date. The first thing project managers should do when examining project files or setting up new ones is to review the project information dialogue box.

When configured with its default views, Microsoft will always open up showing the user a Gantt chart with a split in the middle between some data entry cells on the left-hand side and the Gantt chart on the right. Many project managers never alter this view. They really need to explore the application more to achieve great results.

The most important date that we set in a project is an accurate start date. If your tasks are configured to auto-schedule, unless they are constrained or linked into the network, they will default to the project start date.

Check that the start date is accurate

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Use sheets for data entry and Gantt charts for reporting. Switching to the task sheet hides the Gantt chart. This ensures your focus is on the information going in, not the result in the chart. You can always switch that back on to review your results later.

Now we can start to expose the columns that will help us to create an effective project plan.

This is where you can expose the useful date columns. This includes the start and finish columns, which are usually present by default; the actual start and actual finish columns, which should be set to NA during the planning stage; the constraint type and the constraint date; predecessors and successors; and finally the type column. Working in this sheet view means you don’t need to open the task dialogue to enter data. You can also drag data down a column when you need to set similar values across a range of tasks.

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Step 3 Simple rules for creating your project 1 Always create a start and end milestone.

2 Don’t use summary tasks; they make the sheets harder to review and identify problems. I like to keep my project plans as simple as possible. Summary tasks complicate things. I prefer to use text fields to create task categories. This enables multiple dimensions to be assigned to the task for improved filtering and reporting.

Sheets view for data entry

3 Every task (except the start and end milestones) MUST have a predecessor and a successor. When you open a project sheet and can see the predecessor and successor columns, empty cells are a problem to be fixed. Only the start and end milestones should have one of each.

4 Review constraints and remove them if they are not real. If you do have to add a constraint, make sure you enter a note to tell other file users what is causing it.

Project managers come into the role through many paths, and those with industry experience are well-positioned to produce excellent results. When this industry experience is combined with an ability to use their new software tools, delivering on time and on budget moves from aspiration to reality. rob.mcewan@bakertillysr.nz

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Use text fields to identify stages

Set milestones

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It's official The new Trusts Act 2019 The long-awaited Trusts Bill has now received Royal Assent (30 July 2019), meaning the Trusts Act 2019 will replace the Trustee Act 1956 and the Perpetuities Act 1964. This will make trust law more accessible and clarify and simplify core trust principles and trustee obligations. Overall, this is good news given the significant number of trusts in use in New Zealand (estimated to be between 300,000 and 500,000).

STORY Nicola Hankinson National Technical Manager

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Why do we have a new Act?

MANDATORY DUTIES

The law governing trusts in New Zealand has developed over a long period, with a significant amount of case law being applied through the court system to fill the gaps left between the Trustee Act and the Perpetuities Act. The Trusts Act codifies current practice, and modernises trusts law, with the intention of making the law more understandable and helping to clarify the legal rights and obligations in relation to trusts.

• Duty to know terms of the trust

What are the key changes?

• Duty to exercise powers for the proper purpose

The majority of key changes aim to address the perception that trusts weren’t being properly administered or understood and that beneficiary rights weren’t being adequately protected. One of the major changes introduced by the Act is the establishment of mandatory and default trustee duties (refer table).

• Duty to act in accordance with terms of the trust • Duty to act honestly and in good faith • Duty to act for the benefit of beneficiaries or to further permitted purpose of the trust • A trustee must hold or deal with trust property and otherwise act for the benefit of the beneficiaries in accordance with the terms of the trust

These duties cannot be delegated and may not be modified or excluded.

DEFAULT DUTIES • General duty of care • Duty to invest prudently

Of these duties, we consider that the duty to avoid conflict of interest is likely to be the most difficult to adhere to in practice given that, independent trustees aside, there is generally a strong personal link between the trustees and beneficiaries of a trust resulting in an inherent conflict of interest.

• Duty not to exercise power for own benefit

The default duties can be modified, and we suggest that this is something trustees may want to consider during the transition period.

• Duty not to profit

Another key change is the enhanced administration requirements intended to allow greater accessibility to trust records. Section 41 of the Act requires trustees to retain

• Adviser must alert settlor to modification or exclusion of default duty

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• Duty to consider exercise of power • Duty not to bind or commit trustees to future exercise of discretion • Duty to avoid conflict of interest • Duty of impartiality • Duty to act for no reward • Duty to act unanimously

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“ The expectations and risk of an independent trustee are nowadays akin to that of an independent director.

Trustees should be doing things like championing good governance and procedures at the very least (e.g. organising regular trustee meetings, ensuring thorough decision making and minute taking and keeping good trust records). If your independent trustee is not perceived to be adding any value by being there, it’s definitely worth looking at what other options there are”.

AISON CHANG, DIRECTOR BUSINESS ADVISORY SERVICES, K BAKER TILLY STAPLES RODWAY AUCKLAND

the core documents relating to the trust.

This includes the trust deed, any variations, records of the trust property, accounting records and financial statements prepared during the trusteeship, written contracts that have been entered into, letters or memorandum of wishes from the settlor, documents of appointment, removal and discharge of trustees and any documents provided by a former trustee.

benefit from trust distributions. Trustees must now consider whether there are any factors that would allow them not to apply this presumption (such as whether the information is subject to personal or commercial confidentiality or whether the provision of information may impact on relationships within the family, in the case of family trusts). The consideration of whether the presumption applies should be made at regular intervals.

If you have a number of trusts, as many New Zealanders do, keeping track of all these documents may be difficult, and we anticipate that more New Zealanders will look to engage professional trustees to assist with the increased administration requirements of a trust, or consider whether a trust structure best meets their requirements.

The changes relating to the provision of basic trust information to beneficiaries are intended to increase the degree of transparency through which trusts operates.

However, there is likely to be a cost involved in complying with this requirement, and it would be wise to consider whether the benefits of operating through a trust structure outweigh the increased costs of doing so.

The Act also introduces a presumption that trustees notify beneficiaries of basic trust information, including the fact that they are a beneficiary of the trust and the right to request trust information. In the past, particularly in the case of family trusts, beneficiaries may not have been aware that they were set to 32

Another related cost is the cost of complying with the requirements of the Anti-Money Laundering and Countering Financing of Terrorism Act 2011 (the AML/CFT Act).

Under section 22 (1) (a) (i) of the AML/CFT Act, reporting entities, such as law firms and Numbers · Spring 2019

accounting practices, are required to conduct a higher level of due diligence (enhanced due diligence) for each trust they provide services in scope of the AML/CFT Act to.

This includes verifying the source of wealth or source of funds. If you haven’t already been asked to provide documentation to support the source of your trust’s wealth and funds, the identity and address of trustees and settlors and other information that may be required under the AML/CFT Act then you should prepare yourself to do so.

Who is impacted?

The Act generally only applies to express trusts and certain other trusts described in section 5 of the Act. An express trust is one that is intentionally established by a settlor, as opposed to a trust that arises by operation of law. It is a relationship in which a settlor places property on trust to be held by one or more trustee for the benefit of beneficiaries or for a permitted purpose. As a fiduciary, each trustee owes duties and is accountable for how the trust property is managed and distributed.

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Anyone who is involved with an express trust in New Zealand is likely to be impacted, particularly if you have not let your beneficiaries know they are beneficiaries, if you do not currently report to them on a regular basis and if you don’t currently store all the trust documents in one place. The Act will more directly impact on trustees, settlors or beneficiaries of a trust, as well as those with business relationships with trusts. So, its impact is quite far-reaching.

When does it come into effect?

There is an 18 month transition period meaning the Act will not come into effect until 1 February 2021. This will come around sooner than you think, so we recommend you contact your normal business advisor to work through the implications for any trusts you are involved with. nicola.hankinson@bakertillysr.nz

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Non-resident directors’ fees & withholding Inland Revenue provides some guidance Many New Zealand companies have non-resident directors, and the taxation of payments to these directors has, historically, not been clear.

STORY Jodi Johnston Baker Tilly Staples Rodway Auckland

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In March 2019, Inland Revenue released an Interpretation Statement which gives guidance on when tax must be withheld from directors’ fees paid to non-residents.

The Interpretation Statement sets out that directors’ fees paid by a New Zealand company to a non-resident individual are generally schedular payments (subject to certain very limited exclusions). Payments to non-resident directors will be considered to have a New Zealand source regardless of whether the director’s services are performed in New Zealand or elsewhere (via teleconference for example). The previous position was that tax applied only when the directorship services were provided in New Zealand.

Although this statement sets out Inland Revenue’s view of when non-resident directors’ payments will be New Zealandsourced, this can be changed by certain double tax agreements (DTA) New Zealand has with other countries. Some DTAs, including that with the United States, contain a modified rule whereby non-resident directors may be taxed in New Zealand only for services performed in New Zealand or if the director has a permanent establishment here.

The Interpretation Statement not only discuses payments of director’s fees to non-resident individuals but also payments to non-resident entities (for Numbers · Spring 2019

example, companies or partnerships). The position Inland Revenue takes is directors’ fees will have a New Zealand source to the extent they are attributable to a permanent establishment the entity has in New Zealand, or the services are performed in New Zealand.

The interpretation is somewhat complex. In a worst-case scenario, this change in interpretation can have serious consequences given most non-residents do not have IRD numbers, and therefore, the default rate of withholding would be 45%. If the non-resident has an IRD number the default withholding tax rate is 33%, but they can elect a rate as low as 15%. The tax is not a final tax so it may be possible for the director to file a New Zealand tax return and obtain a refund of any overpayment.

Inland Revenue has provided a concession to historic positions taken. The end date of the concession depends on the DTA (if any) between New Zealand and the country the director is resident.

Given the complexity of the new rules, we recommend contacting your Baker Tilly Staples Rodway advisor if your company has non-resident directors. jodi.johnston@bakertillysr.nz The Interpretation Statement is available at www.ird.govt.nz (search for "is1706").

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Incorporated societies Change is on its way 1908 was a great year for New Zealand. The first passengers travelled by train on the North Island main trunk line, the legendary Edmonds Cookery Book was published, and New Zealanders competed in the Olympic Games for the first time. 1908 was also the year our Incorporated Societies Act was introduced.

STORY Nicola Hankinson National Technical Manager

The Incorporated Societies Act 1908 has governed the operation of incorporated societies for 111 years now. Much has changed since 1908 and the Government has decided that the 1908 Act requires modernising to ensure it keeps up to speed with these changes.

law to run their affairs as though they were an individual person. This means that: • Members are not personally liable for the society’s debts, contracts or other obligations; and • Members do not have any personal interest in any property or assets owned

What are incorporated societies and what does the 1908 Act require?

Incorporated societies are groups or organisations registered under the Incorporated Societies Act 1908, which are authorised by 36

by the society.

There are more than 23,000 incorporated societies currently on the Incorporated Societies Register, including sports clubs, social clubs, and special interest groups. The register can be searched at www.societies. govt.nz/cms.

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Photo by Laura Fuhrman on Unsplash Club racing, Auckland Harbour, New Zealand, 1909, Auckland, by Muir & Moodie studio, Te Pap (PS.000927/02) Albert Park, showing Northern Club, Auckland, circa 1912, Auckland, by Muir & Moodie studio. Te Papa (O.019320) Bowling club members, Circa 1910, maker unknown. Te Papa (C.001988)

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What’s changing?

A draft Incorporated Societies Bill, which proposed a broad range of changes to the way incorporated societies operate, was open for public consultation from October 2015 to June 2016. 116 submissions were received from organisations as diverse as Master Plumbers, NZ Winegrowers, Federated Farmers, Acupuncture New Zealand and the Cycling Action Network. The Ministry of Business Innovation and Employment (MBIE) considered these submissions and, in May 2019, the Government’s Cabinet Economic Development Committee reviewed the proposals and announced its intended amendments to the draft Bill1. The Bill is expected to be introduced into Parliament later this year.

Reporting requirements Under the 1908 Act, incorporated societies have reporting requirements but are not required to prepare financial reports in accordance with any prescribed standards or format, which results in a wide variety of reporting. Consequently, there can be a lack of transparency over the financial affairs of incorporated societies and financial information is often difficult to compare and understand. Under the proposed changes, incorporated societies that are not registered charities will be required to report using standards issued by the External Reporting Board (XRB) when they satisfy one or more of the following criteria: • Annual payments of $10,000 or more • Assets of $30,000 or more

About one-third of all incorporated societies are also registered charities. All registered charities have been required to report under the XRB standards since 2016. Entities applying the not-for-profit standards are required, or will soon be required, to prepare non-financial information, to help readers understand what the entity has achieved, and provide transparency alongside the financial information.

Research2 on incorporated societies undertaken in March 2016 found that 42% of entities had expenditure of less than $10,000.

As such, setting the threshold at $10,000 payments is likely to remove the requirement to prepare financial statements in accordance with XRB standards for almost half of New Zealand’s incorporated societies.

Assurance requirements There is currently no requirement for incorporated societies to obtain an audit or independent review of their financial reports.

The draft legislation proposes a mandatory audit requirement where incorporated societies, that are not registered charities, satisfy one of the following criteria: • Annual expenditure over $2 million • Assets over $4 million.

Incorporated societies that do not meet these thresholds may elect to have an audit or review performed, which may provide stakeholders with greater trust and confidence.

• Donee status under the Income Tax Act 2007.

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Other enhancements The proposals will clarify the roles and responsibilities of officers and introduce new eligibility requirements. This will ensure these volunteers have greater clarity about what is required of them and enable them to focus on advancing their society’s purposes.

There will also be rules strengthening the provisions regarding actual and potential conflicts of interest.

Transitional arrangements Incorporated societies will have at least two full financial years to make the necessary changes to their constitution to ensure all officers meet the eligibility requirements under the new Act and to re-register under the new Act. Re-registration will be actively required, rather than automatically transferred, as initially proposed.

At the end of the transition period, incorporated societies that have not re-registered will be de-registered by the effect of the new Act. However, these societies would be able to apply to be ‘restored’ (as the same entity) to the new register.

As part of the transition process, the Companies Office have committed to: • Enhance the Register of Incorporated Societies • Undertake an education campaign to let people know about the new regime.

What can we learn from the experience of registered charities?

Several commonalities exist between registered charities and incorporated societies, which means they are likely to face similar issues in transitioning to using the XRB standards. These include raising awareness of the need to comply with the new standards and engaging competent people to help prepare the required financial and non-financial information.

One of the issues experienced by registered charities was identifying control relationships that require financial information to be consolidated for accounting purposes.

Scouts New Zealand was one charity that had to undergo this exercise, consolidating the financial information of 391 Scout groups across New Zealand into one set of financial statements. A number of religious groups also found themselves in a similar situation.

If you are involved with an incorporated society, it will be important to consider whether control relationships exist between your society and other entities. This exists where your society has the power to control the entity and to benefit from their operations.

If you have any questions about how the new proposals are likely to impact an incorporated society you are involved with, please get in touch with your usual Baker Tilly Staples Rodway advisor. nicola.hankinson@bakertillysr.nz 1 Details provided on the MBIE Incorporated Societies project page 2 R iordan, S., Typical Transactions in Incorporated Societies that are not registered charities, March 2016

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WOMEN IN BUSINESS

Hannah Mellsop Real Rad Food Hannah Mellsop, a Mount Maunganui local, began making raw treats and sharing her passion for plant-based desserts on Instagram while she was studying at university. The 24-year-old now heads her own business, Real Rad Food, that creates raw plant-based slices and treats for her online store and 64 stockists throughout New Zealand.

We sat down with Hannah to discuss her business success and what the future holds for herself, and Real Rad Food.

STORY Bella Williams Baker Tilly Staples Rodway NZ

Where did your love of food, and raw treats originate from?

When did you decide to turn your Instagram into a business?

When I was studying at university, I was working in cafés, and we started putting a lot of healthier options into the cabinets because there was such a demand for it.

It grew a lot from Social Media, and I really wanted to share the things that I was making in the cafés and that I was making at home and people just really loved looking at them, so it developed from there.

I finished my degree in 2016, I had a degree in Geography but wasn’t that keen to go into that field. I knew that I had this Instagram page, and I was really enjoying posting about the plant-based foods that I was creating, and people were slowly starting to want to buy some of the cakes. I guess I saw a gap in the market of distributing the cakes to cafés across the country and locally and thought

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have finally hit the nail on the head in terms of distributing our product. Now they arrive still frozen, with minimal issues, unlike what we experienced when we first started.

Can you describe one of the proudest moments in your business’s success so far?

I didn’t have anything to lose because I was young and I had the motivation for it, so I just gave it a go.

What were the biggest challenges you faced in the beginning?

I would say frozen freight. Distribution was a really big one for us; we struggled for a really long time for a frozen freight company to want to deal with us because they only work on such big scales we had to work hard to get some big contracts in place before they would allow us to send with them. We were very much confined to local from the beginning and then once we had contracts in place with the cafés in Wellington, Christchurch and Auckland, we were able to then negotiate on using their services, and from there we were able to make sales all over New Zealand, which was amazing.

We ran into the same issues in terms of our online orders and distributing our product to households throughout the country.

Because our products are perishable goods, we needed to make sure we had good packaging, a service that was going to go overnight and not five days. There was a lot of trial and error with that and luckily enough, after a lot of innovation in our packaging, we

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We just got a machine that cuts all of our slices. I’ve been hand-cutting hundreds of slabs of slices for the past two and a half years and last week we finally received a machine from Italy that automates all of that for us. It goes through these wires, and I never have to touch a knife again!

We also won the People’s Choice Award at the Bay Hospitality Awards which was really cool, because obviously, we’re not an established brick and mortar store but for our community to get behind us, and put votes in for us, and then to win alongside some really amazing companies was a proud moment.

What do you think are some of the key contributing factors to your success?

I think growing a community online around our product and offering more than just a product around our brand. I’ve always prioritised branding and made sure I’ve invested into the community that supports us.

Because they have given us so much support over the last few years and I really don’t think that we would be here today without having that community around our brand. They’re invaluable – they support the cafés we are in, they support us online in terms of buying our product from the website and then just supporting us even if they don’t buy the product through Instagram is something in itself.

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How do you balance your business with ‘you’ time?

When people ask this question about balance it's kind of a tricky one, I go through phases of feeling like ‘yeah, I feel quite balanced. Still enjoying going to the gym, I'm working, I've still got a social life, and everything feels in harmony’ but, balance comes in waves. At the moment I’m totally off balance – I haven’t been to the gym in a week, I am doing crazy hours, and I am working hard. But I think that knowing it’s not going to be like this forever and still hustling on is really important.

life and going to the gym. I love going to the gym, yoga, going for a walk up the mountain and getting a coffee with my friends but right now I’m about the business, and I’m here to see it succeed, I would do anything to have it do what it needs to do out there in the market.

I do think that sometimes balance is unobtainable when you’re trying to get to a certain goal and I’m totally fine with being out of balance for periods, but to get that balance back I know that I need to put in the work. I know that what will get that is better systems, then I’ll be able to get back to having a social

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What advice would you give to those wanting to start their own business?

What are your goals, personally and in your business?

For the business it is to be in our own space and working efficiently. In terms of myself, I would love to be able to reach more people in terms of a platform that provides some insight into being a young businesswoman.

Maybe that’s a podcast, or something else, but it’s something that I am really passionate about, and I think that there’s a gap in the market for someone that provides some insight on that. And I’d love to go on another holiday next year!

What keeps you going during long days in production?

I think that there’s huge merit in having a side-hustle and testing the market before you launch. Instagram is a great tool to be able to test how the market is going to react to your product or service, so I would say use that to your advantage while you’re still working your full-time job and paying your rent. Also, in saying that don’t be too slow to pick up a good thing when you see it and trust your gut. Make sure you’ve got determination and passion because passion quickly dies when you’re doing 100 hours a week, but determination is what will get you back up. I don’t think everyone’s cut out for business, but I guess you look into yourself and think about the five to ten-year goal and the life you want to be living and weigh it up from there.

Sometimes, I think small businesses are glamourised, but it’s actually hard yakka, so doing some soul searching before you jump right into it is important.

Since our interview, Hannah has secured new premises and is kitting it out for her Real Rad Factory.

I know that there is a demand out there for our product and I will do anything to meet that demand. It’s a stressful thing not to be meeting demand, and it’s not what I want to be doing. Sustainable growth has always been at the forefront of my mind. I am so passionate about what we do and the product that we produce that if the work needs to be done, I’m there to get it done. I’m working hard to secure new premises so that we can have more space, which means we can have more people and more efficient systems.

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Great conversations Great relationships Great futures Take a look at what we’ve been up to lately

National Party Economic Discussion Document Launch In August our Auckland team hosted National Party Leader Simon Bridges and Finance Spokesman Paul Goldsmith for their Economic Discussion Document Launch. We had strong interest from our clients and the document was launched to a full house. One issue flagged for review was the company tax rate, currently one of the highest in the OECD.

Auckland Mayoral Debate With the Auckland local council elections approaching our Auckland team was proud to sponsor the Property Council of New Zealand Mayoral debate featuring incumbent mayor Phil Goff and challenger John Tamihere. A major topic was the tension between Auckland and Central Government over funding. Both candidates support Auckland City keeping GST on rates, for instance. The audience had plenty of questions, and both candidates had an impressive grasp of detail.

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Taranaki Business Breakfast The Taranaki office hosted their second annual Business Breakfast in August. Attendees received important updates on the Taranaki economy from Venture Taranaki and the latest in Tax, Employment Legislation and Cloud Security. The attendees generously raised $1500 for KidsCan Charitable Trust.

Enhancing Your Employees’ Experience

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This was the third year for Her Thriving Business, a collaboration between Baker Tilly Staples Rodway Auckland and ASB Bank with the aim to connect, inform and inspire Women in Business.

This year over 150 women attended these events, covering Digital Marketing, Enhancing your Employees’ Experience and Effective Time Management. We raised over $2,000 for our charities: Cure Kids, CanTeen and The Hearing House.

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SPCA Cupcake Day

Young Visionaries

Our Taranaki team recently supported the SPCA Cupcake Day, raising $240 for animals in need.

Baker Tilly Staples Rodway Taranaki are proud to have teamed up with the Govett-Brewster Art Gallery/Len Lye Centre to support the Young Visionaries programme. These classes encourage creativity, build confidence, and inspire children to activate their imaginations.

The Gallery is now able to offer free placement in Young Visionaries for children who are passionate about art but face financial barriers in accessing the programme. Part of our sponsorship will also subsidise transport for low decile schools to the Ministry of Educations free ‘Learning and Experience Outside the Classroom’ programmes at the Gallery.

BELOW: Joni Ludlow & Sarah Ellem

Property Tax Update Our Hawkes Bay team hosted a sell-out property tax seminar in August. The key takeaway from the session is that the land taxing rules are complicated, and no two situations are the same!

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Auckland Level 9, 45 Queen St PO Box 3899 Auckland 1140 auckland@bakertillysr.nz T: +64 9 309 0463 Waikato Level 4, 354 Victoria Street PO Box 9159 Hamilton 3240 waikato@bakertillysr.nz T: +64 7 834 6800 Tauranga Level 1, 247 Cameron Road PO Box 743 Tauranga 3144 tauranga@bakertillysr.nz T: +64 7 578 2989 Hawkes Bay Cnr Hastings & Eastbourne Streets PO Box 46 Hastings 4156 hawkesbay@bakertillysr.nz T: +64 6 878 7004 New Plymouth 109-113 Powderham Street PO Box 146 New Plymouth 4340 taranaki@bakertillysr.nz T: +64 6 757 3155 Stratford 78 Miranda Street PO Box 82 Stratford 4352 stratford@bakertillysr.nz T: +64 6 765 6949

About Baker Tilly Staples Rodway Baker Tilly Staples Rodway is a national association of independent practices, with eight locations throughout New Zealand.

Wellington Level 6, 95 Customhouse Quay PO Box 1208 Wellington 6140 wellington@bakertillysr.nz T: +64 4 472 7919

We are proud to be a member of Baker Tilly International, a top ten global network of independent accounting and business advisory firms, whose member firms share our dedication to exceptional client service.

Christchurch Level 2, 329 Durham Street North PO Box 8039 Christchurch 8440 christchurch@bakertillysr.nz T: +64 3 343 0599

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Numbers ¡ Spring 2019 www.bakertillysr.nz