Numbers mag autumn 2013 issuu

No 26 AUTUMN 2013

A STAPLES RODWAY PUBLICATION

THE GLOBAL BAKER

Dean Brettschneider takes NZ baking to the world

THE WALKING DEAD Is your business a zombie risk?

DOING BUSINESS IN CHINA Five tips for success

MEET OUR NEW PARTNER Staples Rodway in Wellington

www.staplesrodway.co.nz www.staplesrodway.co.nz

Staples Rodway is an independent member of Baker Tilly International

DIRECTORS AUCKLAND

Roger Thompson

(09) 309 0463

HAMILTON

Rosanna Baird

(07) 834 6800

TAURANGA

Chris Downey

(07) 578 2989

HAWKES BAY

Stuart Signal

(06) 878 7004

TARANAKI

Chris Lynch

(06) 757 3155

WELLINGTON

Robert Elms

(04) 472 7219

CHRISTCHURCH

Ross Erskine

(03) 343 0599

DISCLAIMER No liability is assumed by 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.

No 26 AUTUMN 2013

IN THIS ISSUE 2 Meet our new Wellington partner Staples Rodway staff getting behind Canteen 3

Staples Rodway appoints 3 new Directors

4

New packs will help save lives

5

Going underground

6

The global baker

8

Employee expenditure payments

10 Is your business a zombie risk?

12 The golden triangle of India 14 OMG! Does the world really need another bunch of TLA’s?

16 Wisdom for those seeking fortune 18 Cloud accounting software for SMEs 20 Focus on trustees’ duties

MEET OUR NEW WELLINGTON PARTNER The Staples Rodway national network gained an important link when long-established Wellington firm PKF Martin Jarvie officially joined the Staples Rodway network on April 1.

S

TAPLES RODWAY HAS BEEN SEEKING a Wellington partner for a number of years and Staples Rodway Chairman Peter Guise says the established and respected local firm fits well into the Staples Rodway network.

“We share similar beliefs and goals around quality of service and relationships with clients and that’s what we have been looking for in our careful search for a Wellington partner,” says Mr Guise.

Martin Jarvie managing partner Robert Elms says the firm is founded on the values of providing top quality personal service to both business and individual clients.

“This philosophy continues today with the partners placing a strong emphasis on building and maintaining client relationships by leading all assignments and being accessible to all clients.”

The firm was founded in 1941 by Henry B Martin who was joined over the next few years

by Robert Jarvie, David Underwood and Graeme Hall and became a very successful, proudly Wellington, Chartered Accountancy practice known for many years as Martin Jarvie Underwood and Hall or simply Martin Jarvie. In succeeding years the partners changed periodically but the underpinning values and the name remained unchanged. For the decade through to 2011, the firm was strongly led by the late Graham Langridge.

Robert Elms became managing partner following Graham’s retirement in 2011 and today the two partners, Robert Elms and David Hulston (pictured above), are assisted by a team of 28, including five experienced managers and a strong professional and administrative complement.

“We work with our clients to assist them in achieving their business and financial objectives while the firm has developed a strong sense of commu-

nity and assisting various community organisations. We currently support the Cancer Society, assisting with collections on Daffodil Day, and sponsor the activities of the Friends of the Cancer Society,” says Mr Elms.

“There is a significant level of expertise and skills within the firm in all facets of accounting, auditing, business advisory and tax compliance. We focus on servicing small and medium sized enterprises, investment trusts and individuals from our premises on The Terrace.”

Mr Elms says the decision to join Staples Rodway was relatively easy with its similar strong focus on client relationships, the provision of quality services and a strong sense of community.

“Staples Rodway offers us a strong national network and presence, and through Baker Tilly a strong international network. The Staples Rodway support services are very important with technical and marketing support being paramount.

“We are moving into a period of significant change both in the general business environment and in financial reporting, auditing and tax, therefore strong representation and support is imperative. Being able to call on any number of specialists within Staples Rodway will allow us to continue to provide our clients with timely, cost effective and high quality advice and services” said Robert.

David Hulston expects existing Martin Jarvie clients will only see positives from the move to join Staples Rodway’s network as it allows the firm to provide a wider range of services to clients and maintain the essence of its 70 years of tradition.

“The beauty of joining Staples Rodway is that we also retain all our current structures, while gaining the benefits of national and international links for those clients.”

STAPLES RODWAY STAFF GETTING BEHIND CANTEEN Article by Mary-Therese Kinsella PARTNERSHIP AND EVENTS MANAGER, CANTEEN

The Staples Rodway and CanTeen partnership has started off 2013 with a flurry of activity. After introductions throughout the country late last year, many of the Staples Rodway offices have started the year as they mean to go on - by getting involved with CanTeen branches nationwide.

C

HARLIE, OUR BAY OF PLENTY based Youth Worker, put it best when she said of the Staples Rodway partnership: “Their support is consistent and on-going”, and well she might, as the Staples Rodway Tauranga Office have been extremely proactive; working with the BOP Committee Treasurer, Rupert to create performance graphs for the committee to replace the current written report. Not satisfied with just doing the minimum, the word in Tauranga is that the SR Team are also planning a head shave to raise funds for CanTeen.

Not to be outdone, Eric Visser, Whitney Richdale and Hamish Gallagher from Staples Rodway Christchurch attended a CanTeen committee meeting in order to meet some members and get a first-hand idea of what makes CanTeen tick. Following on from that meeting CanTeen Northern South Island Regional Manager Koral is actually looking forward to setting budgets for 2013-2014 so

2 • NUMBERS Autumn 2013

she can utilise the skills of Staples Rodway Christchurch!

Finally, huge thanks to the energetic members of the Staples Rodway Taranaki Team, who really pushed it to the limit by taking part in the Taranaki Round the Mountain Cycle Challenge in support of CanTeen. Daimon Stewart and his team rode side by side with a CanTeen member, that’s a combined team effort of 148 kilometres around an active volcano in 6 hours and 39 minutes. Impressive Team Taranaki! Special thanks has to go to Daimon Stewart who not only took part in the cycle challenge, but also sacrificed his “soft, velvet-like” hair to support CanTeen in December last year, raising $1,272 for the local branch All this in the past few months! Thank you so much Staples Rodway New Zealand for embracing our wonderful partnership. All of us at CanTeen are excited to see what the future brings.

STAPLES RODWAY

3

APPOINTS

NEW DIRECTORS

Internal promotions in Staples Rodway saw the company begin 2013 with three new Directors. Former Associate Directors, Daimon Stewart, Craig Hamilton and Craig Barrett took up their new roles in January.

DAIMON STEWART (TARANAKI) Daimon joined the Taranaki office as a senior accountant in May 2002 and has been a Chartered Accountant since 2004.

He has been responsible for a wide variety of duties within the Taranaki team, including staff management and training, business and strategy planning with clients, business development and co-ordinating NZ Trade and Enterprise approved training courses.

In his role, Daimon’s clients have utilised his skills in business and strategic planning to focus on business growth and development and profit improvement. This is a real passion for Daimon who also has an excellent knowledge of the complexities of ACC, FBT and Working for Families.

Daimon has been working closely with CanTeen Taranaki in a number of fundraising and awareness projects and enjoys playing tennis and running around after his two boys.

CRAIG HAMILTON (CHRISTCHURCH) Craig joined the Staples Rodway Christchurch team in April 2007, after returning to New Zealand from Canada and Australia.

While overseas, Craig worked as a Senior Accountant and Auditor for accountancy firm Harris and Partners in Canada, and Foster Raffan Chartered Accountants in Sydney.

At Staples Rodway, Craig’s role includes advising clients on annual compliance and associated tax matters. He enjoys working closely with clients to ensure their business interests are appropriately structured and managed efficiently.

Craig has been responsible for managing a team of accounting staff and client portfolios consisting of mainly small to medium sized businesses. Craig specialises in Income Tax Returns and Financial Statements for various clients, as well as reviewing and monitoring budgets.

With 15 years experience in general accounting and tax issues, Craig provides clients with day-to-day accounting and tax advice, specifically advising on accounting software available in New Zealand and business structuring options always with a focus in tax efficiency and asset protection.

Craig pursues a wide variety of outdoor interests, including road cycling and triathlons, and recently completed the gruelling Ironman triathlon.

CRAIG BARRETT (HAMILTON) Waikato born and raised, Craig completed a Bachelor of Management Studies, majoring in Accounting and Finance. He joined Staples Rodway in 2005 after working for one of New Zealand’s biggest companies.

Craig is a licensed auditor and responsible for the Hamilton audit practice. Craig’s responsibilities also include due diligence, prospectus preparation and reviews, acquisitions/amalgamations, system reviews and technical opinions.

Passionate about all things sport, Craig’s hobbies also include gardening and spending time with his young family.

www.staplesrodway.co.nz

NUMBERS Autumn 2013 • 3

NEW PACKS WILL HELP SAVE LIVES Hawke’s Bay’s surf lifesavers can be “to the rescue” even faster, thanks to a donation from Staples Rodway.

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ACH YEAR FUNDS RAISED FROM the Staples Rodway Cape Kidnappers challenge are donated to a Hawke’s Bay charity - one that touches a large percentage of Hawke’s Bay residents. This year the $14,000 raised was donated to Surf Lifesaving Hawke’s Bay and has so far been used to purchase four “first responder packs”. The yellow-and-red packs weigh about 15kg each and contain everything a surf lifesaver needs to sustain the life of a victim of drowning until paramedics can get to the scene.

Along with resuscitation airways, bag masks and an oxygen cylinder, the packs have wound dressings, bandages and other first aid supplies.

“We often find ourselves responding to motor vehicle and other accidents when we are in a remote beach location,” says Surf Life Saving New Zealand eastern club development officer David Beattie.

“What we have in just one of these new packs is enough equipment to maintain life for up to 40 minutes until emergency services arrive and take over.

BAGS OF LIFE: Staples Rodway directors Libby O’Sullivan and Philip Pinckney look on as surf lifesavers Hamish Beattie, from Ocean Beach Kiwi, and Kelsi Humphrey, from Pacific Surf Club, delve into one of the new first responder packs. PHOTO: PAUL TAYLOR

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And it’s portable - the packs are something our volunteers can grab and go.

Being fast and mobile is critically important for us.”

Teamed with the defibrillators already held at each surf lifesaving club, this new equipment could lift drowning survival rates to as high as 75 per cent, says David. “With drowning victims, we are working on people whose breathing has stopped. This equipment is essential to maintaining life.”

Last year’s Staples Rodway Cape Kidnappers challenge attracted more than 700 entrants - teams and individuals - who ran, walked and enjoyed the course.

Staples Rodway Chartered Accountants directors Libby O’Sullivan and Philip Pinckney says it was good to see the donation so well received and utilised.

The first response packs will be distributed to Ocean Beach, Westshore, Pacific and Waimarama Surf Lifesaving Clubs.

“The surf lifesavers are itching to get their hands on them,” David says.

ARTICLE COURTESY OF THE HASTINGS LEADER

GOING U NDERGROUND Article by Spencer Smith & Sybrand van Schalkwyk STAPLES RODWAY CHRISTCHURCH ssmith@srchch.co.nz svanschalkwyk@srchch.co.nz

Spencer Smith and Sybrand van Schalkwyk, from Staples Rodway’s Christchurch office, literally experienced ‘life at the coalface’, when they travelled to Reefton on the West Coast to visit their client Crusader Coal recently.

The following is Sybrand’s account of a more-than-interesting day out of the office.

T

HE COMMON MYTH IS THAT the life of an accountant is boring. The truth is that we have many wonderful clients in a very wide range of businesses and that makes our job much more varied and interesting than you would believe.

“Now, you’ll only need this if I’ve stuffed something up really badly” says Bernie, as he hands over our oxygen masks and goes through the safety briefing before we enter the mine. I glance over to Spencer, and I can see my feelings reflected on his face. The Pike River tragedy is still fresh in our minds. For tax accountants, this is about as exciting as life gets. The site visit to Crusader Coal’s Terrace Mine seemed like a good idea at the time. Now I am not so sure.

Crusader Coal acquired the Terrace Mine a couple of years ago from Solid Energy. The mine produces thermal coal, rather than coking coal, which is used domestically, mainly for industrial heating. Some of the coal is blended with other coal types for export.

With the safety briefing over, our safety gear on, including hard hat, steel capped gumboots, shiny new overalls, headlamp, and the all important, oxygen mask, we get into Bernie’s small vehicle and proceed to drive to the main entrance to the mine. The entrance is an unassuming three metre wide by three metre tall opening in the side of the hill. It looks pretty strong, and I am sure these guys know what they are doing.

It is only 500 metres or so down into the hill, and we get there in no time at all. I look back as we are driving, and at some point the trajectory of the tunnel takes us away from the light above. It is now just us, Bernie, and our oxygen masks. The mine is quiet today because the workers have Fridays off.

(They work 10 hour shifts, 4 days a week). It is pitch-dark and the land of the living seems far off.

We stop at the bottom of the mine, and Bernie starts showing us around.

The first thing that strikes me are the massive bolts drilled into the roof of the tunnel, with big washers holding wire netting in place all around the tunnel.

Bernie explains that the bolts are to “fool the mountain into thinking that we are not there”. The mesh and bolts also reinforce the very real risk of collapse.

Add to that the risks of explosion, fire and underground flooding. This is not a job for the feint-hearted or the claustrophobic.

As we walk down to the coal face, and yes, there is such a thing, Bernie gives us a small insight into what it is like to work here. A small band of brothers; working in close proximity in a dark and dangerous place, grinding at the earth day-in and day-out to win coal.

Bernie is a big affable Aussie. He’s the son of a miner and is steeped in

www.staplesrodway.co.nz

mining history and the legends of old. He’s a superb story-teller. He points out the tools used to insert the retaining bolts into the tunnel. I don’t envy the men who had to drill these massive bolts into the earth overhead. The bolting equipment requires real physical strength. Spencer and I glance at each other.

We need not say it, but we are both thinking that the Income Tax Act does not look so heavy after all.

Bernie takes us back the way we came, and, yes, we were pleased to see the sun.

It’s not something that we get to do every day (thankfully) but we now have a much greater understanding of our client Crusader Coal’s business.

Spencer and Sybrand go to extreme lengths to get some better work stories

NUMBERS Autumn 2013 • 5

THE

BAKER In between crumbling the aspirations of contestants on New Zealand’s Hottest Home Baker, Dean Brettschneider is on a mission to take New Zealand baking to the world.

D

EAN IS A PROFESSIONAL BAKER and patissier who after 15 years of working for corporate companies decided to go it alone and operate his own business, become a global bakery consultant, and at the same time build his own brand.

Dean is the brand - www.globalbaker.com - while the consulting work takes him all over the world to the UK, Europe, Asia, USA, India and the Middle East. Globalbaker Dean works with Staples Rodway to ensure he keeps on top of his tax resident status.

Being a Kiwi Dean is very proud of his heritage and promotes New Zealand at every opportunity. At his overseas outlets he promotes and imports New Zealand coffee and wine and you will often see ‘NZ’ or ‘Kiwi’ featured somewhere in the title of his books and TV shows. Recently he promoted a boutique Kiwi beer in Singapore by using it in his sourdough bread starter and making petite baguettes. They were a big hit at the opening of his second bakery in Singapore along with what he calls Kiwi Juice (New Zealand wine).

Dean is not categorised by cultural heritage or training and describes his baking style as “Euro-Antipodean” crossing boundaries to make the best of baking available to all.

Working all over the world Dean allows him to keep up with bakery trends, taking a little of all the best products and styles to add to his own style.

You can see this in his two artisan bakeries & food stores in Singapore (www.bakerandcook.biz). The first opened in January 2012 and was such a success he opened another in November 2012. Shortly after the first bakery opened the Singaporean government revoked its restaurant licence citing traffic

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chaos in the neighbourhood.

This meant they were only allowed to serve food on china plates inside the establishment and not outside. Overnight turnover dropped by 30%. But Dean took the challenge and designed take-away boxes that fold out to be a plate with wooden cutlery. Not being served on china meant customers could still sit outside and enjoy their food as it was considered take-away. Turnover has fully recovered. In Singapore Staples Rodway’s membership of global network, Baker Tilly, gives Dean easy access to accounting and tax advice.

PLANS FOR 2013?

As a self-confessed workaholic the list of projects for this year is daunting for most people; but Dean can’t wait to get started.

“For me, baking is a 24-hour-a-day, seven-days-a-week, 365-days-a-year job. It’s not like working, that’s just my style!”

He spent his Christmas holiday touring France with his son, chief gofer, translator and cameraman, Aaron, filming ‘Kiwi Baker in France’ which is now on FoodTV. He has recently filmed the fourth series of ‘New Zealand’s Hottest Home Baker’, where he is sometimes the harsh judge and he is working on a new line of biscuits for the Urban Bakery cookie range - launched in supermarkets last year. He is also in discussions to open his artisan bakery and foodstore concept in Abu Dhabi, Dubai, Guangzhou and Bangkok.

A high end hotel chain in Asia is hoping to use the Dean Brettschneider brand to open boutique bakery/cafes in their hotels later this year. His tenth baking book, PIE, was released late last year and will be released in the UK in their autumn and his 11th book, BAKED will be released in July this year. That means a bit of downtime to start planning the next one for 2014.

Dean has also recently been commissioned to create a series of baking TV shows for The Food Network UK plus present at live food & baking shows in Singapore, Manchester & London.

He says the secret to his success is simple. “Passion is my main ingredient.”

EMPLOYEE

EXPENDITURE

PAYMENTS

The Inland Revenue has just released a discussion document aimed at clarifying the rules around expenditure payments to or on behalf of employees as part of the government’s drive to enhance the “integrity” of the tax system. Read on to find on how to not find yourself out of pocket.

Article by Richard Williams STAPLES RODWAY HAMILTON

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MPLOYEE EXPENDITURE PAYMENTS CAN COVER a variety of different expenses but the IRD discussion document focuses on meals, accommodation, communications and clothing In dealing with these expenses, officials stated that they are trying to find a balance between the private portion (taxable amount) and the work portion (non-taxable). The payment method (eg, allowance or reimbursement etc) should not affect the tax treatment. It was also noted that with the exception of communication, there is an outright presumption that the expense is a private one.

A number of these suggestions are not necessarily significant changes from some existing practice, but are clarifications to ensure consistency. The table below summarises the suggested approach depending on the nature of the payment:

Type of payment

Suggested Approach

Payment for employee’s meal expenses during work travel

Payment tax-free if duration of travel to particular work location is no more than three months. Taxable in full for longer trips.

Payment for work-related meals outside of work travel

Payment tax-free if not regular payment for employee services.

Payment for employee’s accommodation expenses during work travel

Payment tax-free if duration of work travel to particular work location is no more than 12 months. Taxable in full for longer trips.

Payment for accommodation costs outside of work travel

No change, the payment would be taxable.

Employer provides accommodation at or near work place

Confirm the legislation to ensure taxable value is rental value, subject to any employee contribution.

Payment for accommodation costs where more than one permanent work place Special rules to ensure that a payment to meet accommodation costs at one location is not taxable in certain circumstances.

Payment for accommodation costs for employees seconded overseas who remain New Zealand tax resident

Special rules to limit tax value – for example, New Zealand equivalent rent.

Payment for communications (including telephone and internet)

Taxable in full except where private/work element able to be separately identified.

Payment for work-related clothing

Confirm not taxable only when payment is for a work uniform/specialist clothing.

The changes do find a reasonable balance when considering compliance costs, practicalities and tax principles. However the approach to internet expenses seems to be out of touch with current business practice and trends.

The practical concern for employers is that the communication expenses will be wholly taxable unless they are able to produce evidence to justify a different approach.

While this should be simple for telephone calls, an increasing portion of communication expenses relate to smartphone use. This requires internet access and data charges. Conceivably an employer who pays for a work

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smartphone together with an associated “calls and data” package will be required to account for PAYE unless they have prohibited all non-work activity on that phone. This is unrealistic for many employers.

While there are a number of helpful and pragmatic approaches suggested in the document, there may be some areas that differ to how you currently treat some of the payments noted.

If you wish to make a submission on the points raised in the document, please contact your Staples Rodway advisor.

NUMBERS Autumn 2013 • 9

IS YOUR BUSINESS A

ZOMBIE

RISK?

Article by Gareth Hoole STAPLES RODWAY AUCKLAND

It is usually more painful for a business to emerge from a recession than it is going into one.

How do you stop your business from arising as one of the walking dead?

A

NY BUSINESS THAT HAS SURVIVED the past lengthy recession needs to plan their next steps on the road to recovery now or it could be left without enough gas in the tank to take advantage of any economic upswing.

Anyone who has run a marathon will tell you that the last four kilometres are way more painful than the first 38 as the body has, by that stage of the race, exhausted all its reserves.

Similarly businesses that have endured the past few years of economic hardship and hunkered down through the tough times may well have exhausted themselves, finding it difficult to re-energise and launch into the next upward cycle.

In the UK, the phrase “zombie companies” has been coined to describe businesses that have cut overheads to the bone, shrunk inwardly and have just held onto their particular patch of the market - taking no risks and not venturing out of their safety zone.

The problem is that such businesses see no growth and will eventually lose market share to those companies who are less risk averse. As economic times improve, businesses must be ready to take advantage of opportunities and avoid remaining in that “zombie zone”.

It is a matter of businesses getting the basics right to ensure that they are ready for the opportunities ahead. The opportunities for growth present different challenges than simply hanging on for survival. The basic factors needed to be ready for those opportunities to escape the “zombie zone” are:

LIQUIDITY Cash flow is the life blood of any business. If you are only going to get one thing right, let it be your cash flow management. An essential report in any board pack is the 12 week rolling cash flow forecast showing where the peaks and troughs in the available cash funds lie. By having advance warning of an impending cash shortage, management can take actions early to rectify the situation.

Now is the time to be talking to your bankers about your cash requirements to ensure that when the big push for new business is required, you can fund your trading activities. In addition, start re-negotiating trade terms with your

10 • NUMBERS Autumn 2013

suppliers who may be prepared to relax their existing conditions in the interests of more business with you. If you do not ask, you will not receive.

CAPITALISATION Otherwise known as gearing, it is important that the proper capital structure is in place and that business activities can adequately service loans. The prevailing low rates of interest will inevitably rise in the future and businesses should foresee such rises in advance, rather than being caught short with a failure to service debt and meet banking covenants.

ASSETS The quality of assets is probably the most important factor in whether or not a business will succeed or fail. The directors should be reviewing their balance sheet critically and be prepared to divest assets which will not meet the required rate of return in the future. There is little place for sentiment in getting the business up to the fitness level required to make it through the early recovery stages. If an asset is not performing it needs to be removed, preferably yielding up cash to be used more effectively elsewhere in the business or stemming the outflow of cash.

EARNINGS It goes without saying that if a business consistently loses money, it will not represent a sustainable proposition. The importance of setting realistic budgets and measuring actual performance against those budgets cannot be overemphasised. Regular periodic reporting is essential so that management knows precisely where the business is making money and where it is not. Without regular, quality financial analysis the business will be in jeopardy - if it is not measured it cannot be managed.

These are just a few factors for business owners and managers to consider as the green shoots of global economic recovery start showing. Managing these areas well will ensure that their businesses will be capable of growing and thriving rather staying in the “zombie zone”.

THE GOLDEN TRIANGLE OF INDIA Article by Pretheeva Fernando STAPLES RODWAY TARANAKI

Some would say it’s crazy to see India in ten days and even though you can’t do justice to the many sights in such a short time, you do get a good taste. So let me give you a brief impression of my first experience in India, a wonderful country to visit.

I

T’S A VAST AND DIVERSE country with many historical and picturesque sights and literally hundreds of millions of people, speaking different languages, eating varying cuisines, and living different cultures.

We arrive in Delhi and obtain a visa on arrival. We are amused to find our name on a placard. Our tour company agent is there among the throng of people holding placards with the names of the new arrivals.

In Delhi we visit the Jama Masjid Mosque (1650), which holds 25,000 worshippers. As a female, even in a skirt, I am apparently not dressed properly to enter the mosque; so clothing is provided.

We ride in a rickshaw on Chandi Chowk, a famous street in the time of Shah Jahan, involuntarily inhaling the intoxicating fumes of the busy street.

The first major attraction, Humayun’s Tomb (1652) is a fine specimen of Persian architecture.

Qutub Mina (1199 AD) is the tallest brick minaret in the world. By the Mina we see the ruins of a Hindu temple (4th century) and then we visit Rajghat, burial place of Mahatma Ghandi.

Jaipur, the capital of Rajasthan, is known as the pink city, as it was originally painted pink to welcome Edward, Prince of Wales in 1876. Most buildings and walls are still painted pink.

Our next sight, Hawa Mahal (1799), a five-story palace with 953 windows, is situated on the main street of Jaipur. The royal ladies watched the action on the street below through these windows, without being seen by the public.

We travel to the Amber Palace on elephants. Only female elephants are used to transport people to the palace as, we are told, they are more docile and less stroppy than the males.

As we go up the incline along with hundreds of other tourists, also travelling on elephants, we see the spectacular view of the Maota Lake and gardens below. There is one line of elephants going up, loaded with tourists; and another line of elephants walking down, having off loaded their passengers at the palace.

The Amber Palace was built by the Maharaja (King) Man Singh in the 16th century. The Sheesh Mahal, palace of mirrors, has ceilings and interior walls lined with precious stones and mirrors. Overlooking the palace courtyard, there are latticed windows through which the first royal ladies would invisibly watch the victory parades of the king and soldiers.

Through a sandalwood door you enter the Sukh Mahal or palace of pleasure. In summer there used to be water flowing through overhead pipes, keeping the place cool.

The courtyard of the royal women and concubines is cleverly built with

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each of the rooms connected to a balcony that lines the entire courtyard. The steps down to a lady’s rooms are invisible from the other rooms so the Maharaja could visit any of the ladies without the others knowing.

The Jantar Mantar observatory was built in the 18th century by Maharaja (King) Jai Singh and is a collection of architectural astronomical instruments most of which use the overhead sun to help with calculations – and we see the world’s largest solar clock.

The roads are crowded with buses, carts (camel wagons in Rajasthan), pedestrians, tuk tuks and bicycles. Goats, dogs, pigs, cows and of course many people swarm along the roadside where there are also carts selling food – often made on the spot. I even see a woman ironing clothes for customers with a coal iron while most of the buses and vans are packed to capacity, with ticketed passengers even travelling on the roof.

It is the marriage season when we visit and we see wedding parties in the villages including decorated white horses as in some Indian cultures, a bride groom arrives to get married on a white horse. The sound systems are vans with four loudspeakers and one van tows the dowry, a brand new little car, which appears to be a wedding gift for the couple.

For a change of scenery, we visit the Ranthambore National Park, home of the tiger. We see deer, peacock and various birds but no tigers. The highlight is spotting a sloth bear, which comes quite close to our jeep. We visit the ruins of the Ranthambore fort (1 AD) which includes a temple of the god, Ganesh.

In the Agra district we visit Fatepur Sikri (1573), the palace of Akbar. By the side of the Diwaniam (Hall of Justice) there is a stone where an elephant was tied and used to crush any people found guilty of serious crimes.

In Agra we see the Red Fort in which lies the palace of Shah Jahan. At the end of his life he was imprisoned in a marble tower where he could see but not visit the Taj Mahal. When we enter the palace courtyard I am blindfolded and the guide asks my husband to lead me in. The concubines of the Shah were also brought in blindfolded and the beauty of the courtyard had the same stunning effect on them as it had on me.

The Taj Mahal is the highlight of our trip. We gaze with wonder at this amazing world-renowned structure. It is every bit as wonderful as we have heard. Built in the 17th century by Shah Jahan in memory of his queen Mumtaz Mahal, who died giving birth to his 14th child, it is truly a world wonder and is said to be the finest example of Mughul architecture. The marble glistens against a blue sky,a breathtaking spectacle and a fitting grand finale to an amazing ten-day tour of India.

The Taj Mahal - the essential photographic souvenir of India.

Qutub Mina, the tallest brick minaret in the world at 72.5 metres high.

Elephant taxi in Jaipur, Rajasthan.

OMG! DOES THE WORLD REALLY NEED ANOTHER BUNCH OF TLA’S?

AML CDD STR

AML/CFT ACT 2009 PEP CFT

FIU

KYC

Article by Nigel de Frere STAPLES RODWAY AUCKLAND

It’s possible that no other individual piece of New Zealand legislation has been responsible for the creation of more Three Letter Acronyms (‘TLA’s’) than the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (the ‘Act’). So what is it all about, and what will it mean for you?

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S A MEMBER OF BOTH the Financial Action Task Force (FATF) and the Asia Pacific Group on Money Laundering (APG) New Zealand’s regulatory framework around Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT), change on June 30 this year to more closely align with our international obligations.

Prior to the release of the AML / CFT Act 2009, FATF, the ‘inter-governmental group established to promote the effective implementation of measures to combat money laundering, terrorist financing and other related threats to the integrity of the international financial system’, was largely unimpressed with New Zealand’s relatively unsophisticated approach to AML and CFT. The 2009 Act and other associated regulatory changes addresses these criticisms and brings New Zealand into line with international expectations on AML and CFT (as embodied in the FATF’s so called ‘40 + 9 Recommendations’).

Fortunately, given the weight of regulation, these rules do not apply to everyone equally. In keeping with its risk focus, the requirements are initially only applicable to what the legislation defines as ‘Reporting Entities’, entities operating within selected, higher risk industries. The law makers have focussed on the usual suspects: banks, non-bank deposit takers and fund managers, but have also targeted industries that may not immediately spring to mind - casinos, for example.

Now for the bad news – these rules will apply to almost everyone equally.

That may sound contradictory, but most of us operate a bank account, or have a financial advisor that helps us manage our money. And as such, we are all likely to fall within the scope of the new requirements – albeit from the perspective of a customer.

So what will it mean? Essentially, the Act aims to mitigate the risk of New Zealand’s exposure to money laundering and the financing of terrorism by establishing the following three regulatory obligations: Know Your Client, Transaction or Account Monitoring and Suspicious Transaction Reporting.

KYC, or Know Your Client, requires Reporting Entities to ensure that at the start of the relationship with a potential customer that they confirm the identity of their customers and correctly assess the ML / FT risk of each customer to the organisation. The Act refers to this process as Customer Due Diligence (or CDD).

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To further complicate matters, the Act requires that Reporting Entities perform either Standard, Simplified or Enhanced CDD, depending on the nature of the customer and the perceived risk to the organisation. To add to the proliferation of TLA’s, the CDD process also introduces the concept of a PEP, or Politically Exposed Person – essentially anyone who holds (or held) a position of power within a foreign government, or anyone related to someone who holds (or held) such a position. The theory being that a PEP, by virtue of their position and influence, represent a higher risk of involvement in ML / FT. Once an entity knows who they are dealing with, the legislation requires that they monitor the activity of their clients to ensure that there are no significant inconsistencies between the expected transactions (based on the KYC procedures performed at the commencement of the relationship) and the actual transactions. The legislation refers to this process as On-going CDD and Account Monitoring – clearly the boffins weren’t able to come up with a TLA that works for this part of the legislation.

The final component is Suspicious Transaction Reporting (or STR for short).

The legislation establishes an obligation for the entity to report any suspicious transactions identified through the on-going CDD process to the relevant authorities. This is the Financial Intelligence Unit (FIU) of the New Zealand Police (NZP). The Act provides protection from prosecution for those providing an STR, but also introduces significant penalties for those who do not provide an STR when it is appropriate, or when a person ‘blows the whistle’ (ie: informs the subject of an STR that an STR has been issued).

AML, CDD, STR, PEP, CFT, FIU, KYC – this alphabet soup of TLA’s established by the AML / CFT Act 2009 represents a quantum shift in the monitoring of financial transactions in New Zealand.

Financial institutions have and will continue to invest significant amounts in developing their response to this legislation and ensuring they remain compliant.

For the rest of us it is likely to mean providing more information about ourselves and our financial dealings than we are used to, but the end result will be to strengthen New Zealand’s position in the international community as a good place to do business.

NUMBERS Autumn 2013 • 15

WISDOM FOR THOSE SEEKING FORTUNE Article by Rex Wu STAPLES RODWAY AUCKLAND

Nihao. While opportunity is everywhere in China, there are certain rules you need to follow and certain pitfalls to avoid if you are planning on doing business in what is arguably the most dominant market in the world.

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O BETTER EXPLORE THIS COMPETITIVE and highly profitable market, you really need to get to know CHINA – that is Culture, Harmonisation, Investigation, Navigation & Anticipation.

CULTURE Chinese culture is complicated and very different from the European way of doing things. This includes many business practices and habits, for example the giving of gifts to a new business contact. You need to be aware of unusual meanings associated with certain gifts for example giving away a clock means burying a parent. A hat or cap shouldn’t be green as green coloured hats are symbolic of a partner that will cheat on you – a highly offensive gesture. Jokes can also be a minefield for the uninformed. Chinese people have a keen sense of humour but do not like jokes about their family as family and business never mix. It doesn’t matter how close you are to that person, joking about family is not acceptable.

HARMONISATION Networking, relationship building and cooperation with the right strategic partners in the right area of business are critical factors for success in China.

Building good relationships with local government bodies in the area where you plan to do business are a good start. These bodies will introduce you to the most appropriate people within your specific area of business and expertise as it is the local government bodies that usually deal with the compulsory permits and licences necessary for starting a business. If you have good relationships with local government it will be easier for you to build the right connections.

INVESTIGATION This includes investigation of law, procedures, potential traps and opportunities which are relevant to your business. For example, in China, the use of a patent or trademark rights belong to the person who makes the initial application. Large companies in China will spend millions of dollars to purchase a company’s name

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or logo. Another important aspect is the perception of a brand. For example, the recent milk powder safety issue involving chemical dicyandiamide (DCD). This could affect the perception of Chinese people of the quality of New Zealand milk powder products, and could result in further issues for our exporters.

NAVIGATION Strong cooperation with local Chinese partners is a good start to better understanding the market through the benefits of local knowledge. Local partners will be the best qualified to help you comprehend the unique pitfalls and opportunities of doing business in China.

ANTICIPATION Be prepared to deal with fierce competition in a country that has 1.3 billion people. Companies must design their products to be unique in order to prevent others from copying their IP. Unfortunately illegal counterfeiting is widespread in China and enforcement is almost non-existent, so there are many copies of big brand products, such as watches, handbags, jewellery and clothing.

The elements mentioned above in the C-H-I-N-A chain are complementary and indispensable in attaining a better understanding of the Chinese market and business environment. As a member of the Baker Tilly International network, Staples Rodway has the necessary business techniques, services and contacts for you to get your business off to a great start in China. Staples Rodway’s Auckland office also established a ‘China Special Interest Group’ in 2011. Its main focus is to assist local New Zealand clients planning on doing business in China and to work with Chinese clients who are seeking to invest and/or do business within New Zealand.

If you are interested in exploring business opportunities in this exciting and dynamic market, please allow us to talk to you, sharing our insights and expertise.

CLOUD ACCOUNTING SOFTWARE FOR SMES Article by Kaison Chang STAPLES RODWAY AUCKLAND

With the help of the Internet you can be anywhere in the world and remain connected. It has revolutionised the way we do business and now the way we do our accounting in the small to medium sized business (SME) SME marketplace.

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OT ONLY CAN MULTIPLE USERS be looking at your general ledger from multiple locations, but the ability to have your bank feed data directly to your accounting software has led to live accounting, live results, and therefore live decision making.

There are many advantages to “cloud” computing, but there are also some potential downsides SMEs need to consider. Firstly, you may not always have an internet connection to access the service. Also, data entry is often slower than with desktop products. And of course, as you are relying on a third party to secure your confidential information if that company fails you may not be able to access your data or, even if you have the data, to use it.

In terms of what cloud accounting products exist in the SME market, Xero has led the way in New Zealand. Innovative, aesthetically pleasing, functional and user friendly – the success of Xero has come as no surprise in an increasingly tech savvy environment. Xero even allows you to code your bank feeds directly from your smartphone!

Xero has been the clear leader in the cloud accounting market but other longstanding software names are realising the potential of the technology with Banklink, Quickbooks and MYOB releasing their own online alternatives.

MYOB, historically the largest provider of accounting software to SMEs in Australasia, released MYOB Live in November of last year. With its well established base of accounting software knowledge and sourcing bank feeds in partnership with Banklink it will be interesting to see how well they will be received, and how Xero will respond. The increased competition can only be good for consumers and it is worth looking at the functionality of each alternative.

Live Accounts is MYOB’s browser based option and in that way similar to Xero. AccountRight Live is an app-like option, where the software and a back up of data are saved locally to your desktop, but the live data is uploaded and run from the cloud. This enables you to work both offline and online, with the benefits of cloud accounting given a desktop software feel. BankLink has also adopted this hybrid approach with its suite of products that meet the accounting needs of many small businesses.

It will be interesting to see how MYOB desktop users view the new offering and whether desktop software will continue to be supported in the longer term.

One huge advantage of Xero is the large community of “add-on” applications which enable you to integrate additional functionality to your core general ledger system. MYOB’s add-on library is relatively small but no doubt will grow fast.

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Please note that, due to our preferential partnerships, Staples Rodway is often able to obtain a price for our clients lower than those displayed above.

Prices accurate as at 27 February 2013.

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Please contact your Staples Rodway advisor for more information on cloud accounting software packages available, if they are right for you and what options may be best suited to your business needs.

NUMBERS Autumn 2013 • 19

FOCUS ON TRUSTEES’ DUTIES Article by Jackie Russell-Green NATIONAL TECHNICAL MANAGER jackie.russell-green@staplesrodway.com

Trusts are a popular structure for protecting and managing wealth in New Zealand. However, they are not immune from criticism from a number of sources, including divorcing spouses, dissatisfied beneficiaries and creditors, which can make being a trustee challenging. National Technical Manager, Jackie Russell-Green, provides guidance on the basic duties that trustees must perform.

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TRUST’S TRUSTEES GENERALLY POSSESS WIDE discretionary powers and authority. With that authority comes the responsibility to diligently perform a number of duties.

The most important duties that trustees owe to a trust’s beneficiaries are: The duty of efficient management The duty to keep and render accounts The duty to act personally The duty of loyalty.

The duty of efficient management Trustees must ensure that the trust fund is managed in an efficient and economic manner. On a practical level, this means that each trustee must thoroughly understand, and obey, the terms of the trust and take all those precautions that an ordinary, prudent, business person would take in managing his or her own affairs. Trustees should also ensure that they invest the trust fund in accordance with the terms of the trust deed.

Trustees must be aware of the trust’s assets and liabilities and ensure that title to all trust assets is appropriately held. Where title to trust assets is registered in the names of trustees, title records must be updated when a trustee retires or a new trustee is appointed. Precautions should also be taken to ensure that the trust’s assets are protected against improper use.

Finally, trustees should monitor the management and administration of the trust, by, for example, checking bank statements and regularly reviewing management accounts and investment reports.

The duty to keep accounts Trustees have the duty to keep a full and proper record of their administration of the trust assets. To do this, trustees must: Ensure that proper accounting records are kept and that financial statements relating to appropriate accounting periods are prepared Make trust documents available to the beneficiaries. Such documents may include the trust deed and financial statements.

The duty to act personally A trustee has the duty to act personally in managing trust affairs. Essentially this means that a trustee can seek professional advice, or refer to the settlor’s documented wishes, but cannot delegate his or her powers and discretions, unless such delegation is specifically permitted by the trust deed or by law (for example, section 29(2) of the Trustees Act 1956 permits trustees to appoint an

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agent in relation to property held outside New Zealand, while section 31 permits a trustee to delegate his or her trusts, powers and discretions to another person where the trustee is incapacitated or absent from New Zealand).

Where a trust deed permits trustees to appoint agents, those agents are usually only appointed to carry out a decision taken personally by the trustees.

When appointing an agent, trustees must ensure that an appropriate person is appointed and that the agent is properly supervised. The appointment of an agent does not remove the trustees’ duty to act personally.

In addition, trustees must exercise their powers in a timely fashion and with reference to relevant facts and circumstances. Trustees must also act unanimously, unless the trust deed allows majority rule, and are together responsible for the trustees’ decisions and actions – there is no room for a passive trustee.

The duty of loyalty The duty of loyalty requires trustees to observe the terms of the trust and manage the trust assets in the beneficiaries’ best interests. This means that trustees should: Gain an understanding of the beneficiaries’ circumstances Act exclusively in the best interests of all the beneficiaries of the trust, both present and future Act impartially as between beneficiaries.

Trustees also have a general duty to avoid putting themselves in a position of conflict between: Their duties to the trust and its beneficiaries and their personal interests; or Their duties to the trust and its beneficiaries and their duties to others.

In addition, trustees must not profit from their position as trustee unless this is expressly authorised by the trust deed, all of the beneficiaries consent, or court approval is obtained. Naturally, a trustee who is also a beneficiary may receive benefits from the trust as a result of being a beneficiary of the trust.

Concluding thoughts Acting as a trustee brings a number of responsibilities. While the information above provides a high level summary of trustees’ duties, it is not a comprehensive list. If you are currently acting as a trustee, or considering accepting a trusteeship, you will need to satisfy yourself that you fully understand your responsibilities and that you fulfill those responsibilities.

The Law Commission is currently undertaking an extensive review of trust law. When changes to the existing requirements are confirmed, we’ll provide updated information in Numbers.

SOME OF THE BASIC STEPS THAT TRUSTEES SHOULD TAKE ARE: F amiliarise themselves with the trust deed and any key documents relating to the trust Familiarise themselves with assets held by the trust and any liabilities and obligations incurred or owed by the trust Satisfy themselves that the trust can perform its obligations Actively involve themselves in the trust’s affairs Responsibly manage the trust by, among other things, ensuring that: There are regular trustee meetings Decisions made at trustee meetings, and the reasons for them, are well documented and that the minutes of meetings are signed and retained The income-producing potential of all investment assets is maximised All trust assets are adequately insured and maintained in good order and repair Separate bank accounts are opened for the trust (to avoid mixing trust funds with personal or other funds) Professional advice is taken when necessary.

AUCKLAND Level 9, Tower Centre 45 Queen St, PO Box 3899 Auckland 1140, New Zealand Phone 64 9 309 0463 Fax 64 9 309 4544 enquiries@staplesrodway.com

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HAWKES BAY Cnr. Hastings and Eastbourne Streets PO Box 46 Hastings 4156, New Zealand Phone 64 6 878 7004 Fax 64 6 878 0078 postmaster@stapleshb.co.nz

NEW PLYMOUTH 109-113 Powderham Street PO Box 146 New Plymouth 4340, New Zealand Phone 64 6 757 3155 Fax 64 6 757 5081 newp@staplestaranaki.co.nz

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CHRISTCHURCH AMI House 116 Riccarton Road, PO Box 8039 Christchurch 8440, New Zealand Phone 64 3 343 0599 Fax 64 3 348 0186 chc@staplesrodway.com www.staplesrodway.co.nz