No 30 WINTER 2014
A STAPLES RODWAY PUBLICATION
BUSINESS HEALTH SURVEY
Take the survey and be in to WIN an HP 8 tablet
CLASSROOM IN THE CLOUD Learn how to keep up with the play with our webinars
Say hello to New Zealand's new influx of investors
Real time financial assistance
Staples Rodway is an independent NUMBERS Winter 2014 â€˘ 1 member of Baker Tilly International
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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 2consult â€˘ NUMBERS your advisor Winter before acting 2014on this information.
No 30 WINTER 2014
IN THIS ISSUE 2
Canteen sponsorship keeping active
Webinars: Join our classroom in the cloud
Japanese investment in New Zealand
Virtual CFO service: Real time financial assistance
8 Business health under the spotlight 9
Offshore keeps it local
10 Information sharing among tax authorities 12 Top 5 tax issues for immigrants 14 New Caledonia: Open for business and pleasure
CANTEEN SPONSORSHIP KEEPING ACTIVE CHARITY QUIZ SUCCESS I
N EARLY JUNE, ORIGIN ENERGY and Staples Rodway Taranaki joined forces to raise over $1,200 for CanTeen in the (now) annual Winter Warmer Pub Quiz for CanTeen. 13 teams consisting mostly of Engineers and Accountants pitted their wits to fundraise for CanTeen and earn a years’ worth of bragging rights. The deal was that for each round an Origin Energy team won, Staples Rodway needed to increase their total donation by an extra $50, and vice versa. Unfortunately for Staples Rodway, answering trivia questions over a beer ignited such passion in Origin Energy that they won five of the eight rounds. This competition is just one of many fundraising initiatives that Staples Rodway Taranaki have launched since their charity partnership with CanTeen over 2 years ago. Director Daimon Stewart says “it’s great being able to organise these activities which get our team involved, where everyone has a good time and we raise some good money for a great cause”. The money will go towards regional programmes that support, develop and empower local CanTeen members dealing with cancer. Since 2012, Staples Rodway Taranaki has raised
over $4,000 in fundraising alone. To stay informed of these initiatives check out the Staples Rodway Taranaki Facebook page.
Vicky Meijer (left) of Origin Energy and Daimon Stewart of Staples Rodway (right) hand over a cheque to the tune of $1,232 to Katrina Angelo (centre) of CanTeen Taranaki.
AUCKLAND BUDGETING WORKSHOP Budgeting Workshop attendees
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N MAY, THE STAPLES RODWAY Auckland office, as part of its sponsorship of CanTeen, for the second year running invited a group of CanTeen committee members from the Northland and Auckland branches to attend a budgeting workshop. The committee members comprised mainly high school and university students with little to no accounting background. The attendees are responsible for running the day to day activities of the branches as well as organising events such as camps. These responsibilities mean that the committee members are involved in the budgeting process for their respective divisions. To increase their understanding of what budgeting involves the workshop covered the basics of budgeting such as the purpose of a budget, how to understand and use budgets, and how to prepare budgets as well as a basic introduction in to how to read a profit and loss statement and balance sheet. The workshop was led by Lorna Fussey of Staples Rodway, and the feedback received was extremely positive. Staples Rodway Auckland is looking forward to hosting similar events in the future.
JOIN OUR CLASSROOM IN THE CLOUD If you haven't experienced a Staples Rodway webinar yet, you'll discover that its the easy way to keep up professional development.
T IS MID-WINTER, AND THE minds of every Chartered Accountant turn to renewing their membership. As you work through the questions, you find that you have struggled to get enough verifiable continuing professional development (CPD) hours. For many accountants, it is often difficult to obtain CPD hours. The traditional way of undertaking training has been to participate in some form of in-house training or to sign up to and attend external courses. Technology offers a far better solution through what is called a webinar. So, what is a webinar? A webinar is an online based seminar with a moderator, presenter and audience. Because webinars are online, there is no requirement for all these people to be in the same room. For example, you could be sitting in Invercargill watching an Aucklandbased presenter discussing the latest GST changes. The removal of physical barriers is not the only advantage of the webinar. Because a webinar is online based, all you pay is a fee to view the webinar on a single computer. Multiple people can gather in a meeting room, the single computer can be set up and all those people can benefit from the expertise of the presenter without significant cost being incurred for additional attendees. All this saves travel time and allows the user to determine when and where they train. An example of where this can be useful is a webinar on PAYE issues being viewed by the payroll team. While the webinar viewer will see the slides, they do not physically see the presenter. However, there is nothing preventing viewers from participating in a similar way to traditional presentations. Webinars typically have a question and answer session at the end and a copy of the presentation slides are typically made available either before or following the presentation. Another advantage is that it is possible to view a previous webinar online. Many webinar providers have an extensive library of webinars, which
can be viewed at a date after the webinar was originally presented. If, for example, you feel that your knowledge of imputation credits is lacking and no courses are available for the next few months, then you can search for an appropriate webinar and brush up on your skills. At Staples Rodway, our staff have a wide variety of expertise. The webinar environment offers us a better opportunity to share our knowledge and stories with you. CCH and CPA Australia have partnered with Staples Rodway Auckland to provide webinars to diverse New Zealand-based audiences on a wide variety of topics. So far this year, we have covered topics ranging from PAYE and Imputation Credits through to changes in the Financial Reporting environment, with many more webinars to come. If you are interested in viewing a webinar, then our website has all the details of upcoming webinars that we are hosting on behalf of CCH and CPA Australia, along with the links that you will need to register.
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JAPANESE INVESTMENT IN NEW ZEALAND Article by Annette Azuma STAPLES RODWAY AUCKLAND email@example.com
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Annette Azuma looks at Japanese businesses and high net worth individuals investing in New Zealand.
EW ZEALAND APPEALS TO JAPANESE investors because it offers an easy place to do business in a well established democracy. With New Zealand’s stable political environment and a society where honesty and longterm business relationships are valued, Japanese investors appreciate our open, globally competitive economy operating on free market principles.
CORPORATE INVESTMENT Japan is New Zealand’s fourth largest trading partner (after Australia, the United States and China), with New Zealand exports to Japan totalling NZ$2.9 billion in 2013. The value of Japanese direct investment in New Zealand in 2013 was NZ$3.2 billion. Much Japanese investment is to secure supply, particularly in the food & beverage and resource sectors, and to cover the distribution of goods. Japanese companies provide direct employment for over 9,000 New Zealanders, and many more indirectly. Investing in New Zealand's food and beverage industry gives overseas investors access to the largest manufacturing sub-sector in New Zealand. Export revenues from this industry total about NZ$25 billion a year and are fast-growing. Recent transactions involving Japanese investors include: 2009: Suntory Group purchased soft drinks company Frucor for €600 million. 2009: Kirin Holdings Company Limited purchased Lion Nathan, a company in the brewing and liquor distribution business, for approximately NZ$7 billion. 2011: Asahi Group Holdings Limited purchased Independent Liquor in New Zealand and Australia for NZ$1.5 billion. (Also purchased Charlies (Better Drinks) in 2011 for NZ$129m). Other recent notable transactions include the sale of Carter Holt Harvey's pulp and paper and packaging businesses for NZ$1.037 billion (one of the largest single Japanese investments in the New Zealand economy), subject to regulatory approvals. Japanese purchaser Oji (in conjunction with JV partner, government-backed Innovation Network Corp of Japan), is looking to secure a source of conifers which are in short supply globally. In addition, there are identified synergies with Oji’s domestic and global operations. In the biotechnology sector, Otsuka Pharmaceutical Ltd formed a JV with Auckland based Living Cell Technologies (LCT) in 2011, investing NZ$33m for clinical trials for treating Type 1 Diabetes. The breadth of activity is also indicated by Staples Rodway assisting Japanese clients in the engineering, agricultural, automotive distribution, hospitality and other industries.
INDIVIDUAL INVESTMENT In recent years, increasing numbers of High Net Worth (HNW) individuals have chosen to move to New Zealand from Japan. A total of NZ$77.5 million has been invested in New Zealand by Japanese migrant investors in the five years from 2009 to 2013, by 12 individuals. The average investment is NZ$6.4 million each, higher than all other countries with migrant investors to New Zealand, including USA, Singapore and China. A further NZ$40.5 million is currently in the pipeline, waiting to be invested in New Zealand by applicants from
Japan. The calibre of the Japanese HNW individuals is very high, and includes a number of Ultra HNW investors, with funds available in excess of NZ$35 million. New Zealand benefits not only from monetary investment but also from their talent and global connections. There are a number of factors which are pushing HNW individuals to leave Japan, including: High inheritance taxes at 55% for amounts over JPY 600 million with effect from January 2015; High income tax rates for income exceeding JPY 40 million, 55.9% from January 2015; The aging population, declining domestic market and the continuing stagnation of the Japanese economy; The potential long term effects on the environment, the food chain and consequently public health of the Fukushima nuclear disaster, which spread radioactive contamination over more than 4,500 square miles of the Japanese mainland in 2011. There is also fear of future natural disasters; and Political tensions within Asia. The reasons these Japanese HNW individuals are choosing to move to New Zealand rather than other destination countries include: A favourable financial regime, including the fact that New Zealand has no death duties and a relatively low corporate tax rate of 28%. The top income tax rate for individuals is 33%, which is lower than all 27 other high-income nations in the Organisation for Economic Co-operation and Development (OECD) and there is also currently no capital gains tax (specifically, in cases where assets are purchased with the intention holding long term). Immigration policies, with the New Zealand Government welcoming HNW migrants, with applications processed and approved very quickly for transparent cases. There are two categories: ‘Investor Plus’ requiring NZ$10 million to be invested in New Zealand for three years, and ‘Investor’ which requires NZ$1.5 million to be invested in New Zealand for four years. Lifestyle factors, with New Zealand’s distance from Asia seen as an advantage, given political tensions in South East Asia. New Zealand is often therefore viewed more favourably than other high profile destinations for HNW migrants such as Hong Kong and Singapore. New Zealand’s natural beauty in a clean and largely unspoiled environment, and its relative safety, offering a tolerant, welcoming country with a strong sense of community. The four seasons and moderate climate appeal, together with its opportunities for good education system and healthcare. Immigration New Zealand and partners, including Annette Azuma of Staples Rodway, presented a series of seminars in Tokyo, Osaka and Nagoya in February 2014, promoting the attractiveness of investment in New Zealand and providing information on migration visas. Further seminars are planned for August 2014. Staples Rodway in Auckland is focussing on this business with a Japanesespeaking team of four led by Annette Azuma, a Business Advisory partner. The team already services many Japanese corporations and HNW investors including a number of ultra HNW investors. For further information on Japanese business, contact Annette Azuma and her team on 09 309 0463.
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VIRTUAL CFO SERVICE
REAL TIME FINANCIAL ASSISTANCE Article by Sharyn Bell STAPLES RODWAY WAIKATO firstname.lastname@example.org
Is your time being increasingly spread across a number of competing strategic priorities? As an owner in a growing business do you need more comfort in the performance of your business and return on money invested? Do you need a management reporting package that supports you when making decisions about the future using real time data presented in a meaningful way?
ORE THAN EVER, OUR CLIENTS are telling us that the answer to these types of questions is ….YES! So we have designed a Virtual Chief Financial Officer (VCFO) service that will bridge the gap between the strategic priorities of the business owner and day to day financial performance. VCFO is a real-time service that provides business owners with a “finger on the pulse” by extracting meaningful financial information from core data.
GEM EN T RE
Ta c t
ic al D e ci s i o
KPI’S & DASHBOARDS Strategic Decisions
MANAGEMENT REPORTS Quality data capture translates into effective communication to business owners and management where reports extract and present meaningful financial information. Too much financial information presented in a confused and non-structured way leads to frustration. Clear and tailored financial information using the language of the end-user provides purpose and context within a business. VCFO includes scoping to understand your management reporting requirements and developing reporting packs “fit for purpose” rather than taking a one size fits all approach.
KEY PERFORMANCE INDICATORS & DASHBOARDS Dashboards are the enabler and platform to create pin-point measurement of key performance drivers aligned with the strategy for your business. Our VCFO service includes understanding your strategic priorities, taking key performance drivers of the business and developing a Dashboard of key performance indicators which can be regularly updated and reviewed using quality data capture and management reports.
r a ti o n al D e ci s io n
transparency and understanding while reducing distortion and potential “overreaction” as a business owner. VCFO includes reviewing current data capture processes, providing feedback and where relevant developing operation manuals and quality checklists to support and guide personnel within your business during the data entry phase.
TEST & REVIEW
Every business needs a sounding board and accountability for performance while executing the strategic plan. VCFO includes a periodic review function to ensure the integrity of data for reliable decision making, analyse actual to budgeted performance, discuss KPI’s and key goals identified and challenge any assumptions or business norms.
We all know that data integrity is central to good decision making. It's also the first step to establishing a quality management reporting package. If you have seasonality or volatility in your business cycle, quality data capture creates
If you would like to know more about our VCFO service offering contact your lead advisor at Staples Rodway.
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UNDER THE SPOTLIGHT Staples Rodway has developed a survey that business owners and managers can use to quickly assess the health of their business. The survey results will also be collated to provide an overview of the business health of small to medium sized New Zealand businesses (“SMEs”).
UMBERS INTERVIEWED STAPLES RODWAY NATIONAL Technical Manager, Jackie Russell-Green, to find out more about the purpose of the survey and the benefits for businesses that complete it. NUMBERS: Jackie, what made Staples Rodway want to undertake research into the health of SMEs? JACKIE: Business commentators often say how important SMEs are to the New Zealand economy, but we don’t know a lot about how they operate and their overall state of health. We wanted to get some hard information on how SMEs are doing, and specifically on whether they have put in place the sort of business practices that are usually associated with success. In addition to that, most of our clients are SMEs, and we know how hard it can be for owners and managers of SMEs to find the time and resources to evaluate how well their business is tracking. Although no survey will ever be able to predict future business success or failure, there are a number of factors that serve as good indicators of whether a business has the right foundation for success and we have incorporated those factors into the survey. We designed the survey to be quick to complete, but to provide information that will actually help SME owners and managers to run their businesses more effectively. NUMBERS: What do you intend to do with the results of the survey? JACKIE: The first thing we’ll do is feed the results back to the people who completed the survey, so they can not only see how their business is doing, they can also see how they compare with other SMEs. We’ll also publish the results of the survey in Numbers. If we find common areas that businesses should focus on, we’ll look at how best to communicate about those, which might be through an article in Numbers, or another Staples Rodway publication. NUMBERS: Now for the most important question Jackie, what’s in it for those people who take time out of their busy schedules to complete a survey? JACKIE: I’m glad you asked! The first thing that respondents will get is a report on their individual results. This report will show how they’re doing in several key business health areas, and, if areas for improvement are identified, provide practical suggestions for making such improvements.
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Once all the survey responses are in, respondents will also get a report showing their performance against the performance of all businesses that completed the survey. This will enable individual businesses to identify areas in which they may be ahead of the rest of the market, and areas where they may need to focus their attention in the future to make sure that they don’t fall behind best business practice. Also, all surveys completed by 30 September 2014 go into the draw to win an HP 8 Tablet. NUMBERS: Will the information that people provide remain confidential? JACKIE: The information that people provide will be totally confidential. The survey results will be combined in a manner that will mean that no individual business that completed the survey will be able to be identified. Information on individual businesses that completed the survey also won’t be shared with parties outside Staples Rodway. NUMBERS: How do people go about completing the survey? JACKIE: There is an interactive copy of the survey on our website (www.staplesrodway.co.nz), where you can fill it out on your computer and send to us. Just click the button on the bottom of this page to be taken directly to the survey. NUMBERS: When does the survey close? JACKIE: Only surveys received by 30 September 2014 will be included in the research findings (and consequently receive a comparison of the health of their business to the health of all businesses that completed the survey). However, a business can fill in the survey at any time and we’ll send them information on the health of their business. NUMBERS: Can people who aren’t Staples Rodway clients or who don’t receive Numbers complete the survey? JACKIE: They certainly can. The more people who complete the survey, the more useful the results will be. If others want to complete the survey, they can do so from our website (www.staplesrodway.co.nz), or they can email us at email@example.com and we’ll email or post the survey to them. If you fill out the survey electronically, it will be even faster to complete.
OFFSHORE KEEPS IT LOCAL In business, a lot of importance is placed on relationships, specifically face-to-face ones. When your company is based primarily out of Taranaki, it’s harder to have your accountancy specialists based in Wellington, especially if your business relies on immediate contact from its advisors. Offshore Solutions was surprised and delighted to find just what they needed,right on their doorstep.
ORMED IN 2000, OFFSHORE SOLUTIONS Limited (Offshore Solutions) is a joint venture between three New Zealand companies: Swire Pacific Offshore NZ Limited, Seaworks Limited and ETL Group Limited. A partnership created in direct response to clients crying out for an integrated package of marine and logistical services to support their offshore operations out of New Plymouth, Offshore Solutions combines decades of experience from across all three companies.
what Staples Rodway offered – consistency in staff, someone who was always available, and not just a person who would take messages. As Andy Neville, Director of the company said “Offshore Solutions is able to call someone who can give us advice straight away, or someone who is available for a quick chat in the office if we pop in with a tricky issue”. In a world where we rely on our cell phones and the internet, too often the value of an old fashioned face-toface meeting is underestimated.
Offshore Solutions needed a full service accountancy firm in Taranaki. Staples Rodway's nationwide network delivered them just what they were looking for.
Offering a wide range of logistical support services to onshore and offshore drilling programmes, Offshore Solutions is now an integral part of its clients’ daily operations. As a service provider, the company prides itself on being able to offer the full spectrum of services to their clients, essentially forming the “one stop shop”. Funnily enough, that’s essentially why Offshore Solutions came to Staples Rodway. Offshore Solutions was previously with a large accountancy firm. Due to high staff turnover, it seemed as though every time they called their accountants to have something done there was someone new in the office, someone new to explain their business to, and no familiar voice down the other end of the telephone. The firm definitely didn’t have an office in the ‘Naki. And that’s
Initially, the Staples Rodway team in Taranaki commenced work in providing audit and tax advice with directors Robin Brockie and Daimon Stewart leading the charge, and that’s now evolved into Business Computing Services, led by director Rob McEwan, providing IT services to the company. Offshore Solutions work with a diverse range of clients and shares with Staples Rodway the same philosophy of being a “full service” company. Offshore Solutions aren’t just logistics, and they’re not just support vessels or marine equipment; they are full service and can manage everything from the get-go. Staples Rodway provides the “one stop shop” in accounting and business services to a company that prides itself on that same concept, and we’re sure we can provide the same great services to your company too.
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N O I T A M R G O N F O N I M A G S N E I I R T I SHA UTHOR T U A B X T S A T IS FIR T A S S A U L E E H TH T E B T ’ N WO
Article by Mike Rudd STAPLES RODWAY AUCKLAND firstname.lastname@example.org
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ATCA IS AN ACRONYM OF Foreign Account Tax Compliance Act, and is a unilateral American initiative, requiring worldwide banks to provide information to the US tax authorities in respect of “US Persons”. The information is intended to identify to the US Tax Authorities where income derived by US Persons has not been taxed in the US when it should have been. The US view on who it is permitted to tax, and the type of income that can be taxed is wider than many other countries, and FATCA gives the US a significant enforcement tool. Agreements between the US and many other countries around the world regarding FATCA are already in place. An Intergovernmental Agreement between New Zealand and the United States was signed on 12 June 2014, and this resulted in the commencement of FATCA obligations in New Zealand from 1 July 2014. The cost to comply with the information to be provided is substantial and it is interesting that the French-located Axa Bank made headlines when it announced it had chosen to close its American clients’ accounts rather than incur the substantial costs required to comply with FATCA.
INFORMATION SHARING BETWEEN TAX AUTHORITIES – FURTHER CHANGES PENDING FATCA has enabled other governments to effectively plead the case for further information sharing. Government negotiations that arose following the advent of FATCA have resulted in bilateral exchange of information agreements between tax authorities, with many requiring reciprocal provisions to those of FATCA. New Zealand confirmed earlier this year that they will back an agreement by the G20 Finance Ministers to automatically share information about taxpayers. At least 20 other countries (and growing) outside the G20 have indicated they will also adopt this approach. The new information-sharing system is intended to be in place by the end of next year, although this deadline is likely to be hard to meet. Although there are currently information sharing provisions in place in bilateral double tax treaties (e.g. the New Zealand-United Kingdom Double Tax Agreement), in most cases this requires specific requests to be made for taxpayers by name, rather than the automatic information sharing planned here. Another hurdle that needs to addressed by the OECD as part of this process, is reaching agreement on how profits derived from trading in multiple countries (including over the internet) should be taxed. It is one thing to share information about what taxpayers are doing in each others' countries, it is another to agree who has primary taxing rights over those taxpayers. FATCA and the OECD measures are aimed at more traditional financial instruments, but it is the start of greater co-operation between governments, and taxpayers need to be aware of these potentially significant changes.
WHAT DO I NEED TO DO?
You may have noticed recent media coverage about something called FATCA, and the effects this could have on people resident in New Zealand who have a connection with the US. The implications are wider than you might think and the information sharing it introduces is only the start of similar moves internationally.
The compliance requirements of FATCA primarily fall on financial institutions outside the US and require them to report to the US tax authorities details of financial accounts held by: US citizens US tax residents US specified persons, including those who have ever held a Green Card wherever they are living. Certain non-US entities controlled by US tax residents or US citizens. There is a minimum amount required for disclosure. If a US Person has a standard deposit account (or accounts combined) of less than US $50,000 at a financial institution, then there is no reporting requirement. If you are one of the affected classes, then you should expect that the US tax authorities will become aware of your investment(s) and you should make sure that you comply with any US tax requirements you have. More widely, given the expected changes by other countries, including New Zealand, you should be aware that there will be greater sharing of knowledge and information regarding: Investments held by New Zealand tax residents in overseas countries. Investments held in New Zealand (and other countries) by tax residents or citizens of other countries who are living in New Zealand. Prior to the wider rules taking effect, we recommend reviewing your structuring and portfolios if you fall into either of the above categories.
OTHER ENFORCEMENT POWERS On related matters, the OECD Convention for mutual co-operation between tax authorities came into effect in New Zealand on 1 March 2014. As a consequence, the New Zealand tax authorities now have extended powers to recover unpaid taxes and fines from taxpayers who move overseas. Similarly, expats living in New Zealand can expect the New Zealand tax authorities to assist with the recovery of debts that they owe to overseas tax authorities.
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Sybrand van Schalkwyk STAPLES RODWAY TAURANGA email@example.com
New Zealand is a country where new migrants are common, and many of us know people who are thinking of migrating or have recently migrated to live in New Zealand. You may be thinking of migrating to New Zealand, or have recently migrated to New Zealand yourself. You have probably thought of tax issues, but no-one in your country of origin is an expert on New Zealand taxation, and you are not sure who you should ask in New Zealand about these questions.
ERE ARE THE TOP 5 tax issues we advise migrant clients on, and that new migrants should consider before coming to New Zealand.
1 WHEN WILL MY NEW ZEALAND TAX RESIDENCE START? New Zealand has two tests for tax residence purposes. These tests function independently from tests used for immigration purposes. You will generally be resident in New Zealand if you spend more than 183 days in a 12 month period in New Zealand. Your residence starts from the first day of presence, so if you came for a “look, see, and decide” trip, your residence might start earlier than you think. The other test that could catch you is known as the permanent place of abode test. Briefly, you are likely to satisfy this test if you have a place available for you on a permanent basis, such as a house or a rental, and you have a sufficiently permanent connection with New Zealand. Whether you have the required level of permanence depends on the consideration of various factors. For most people migrating to New Zealand it will be fairly clear when they become tax resident in New Zealand.
2 WILL I BE A TRANSITIONAL RESIDENT ONCE IN NEW ZEALAND? A decade ago there was concern in New Zealand that the high end of the labour market was either working in London, or moving across the Tasman. Around this time Australia introduced an exemption from tax for highly skilled temporary migrants on their offshore income, to encourage these migrants to work in Australia. New Zealand introduced similar measures for migrants who came after 1 April 2006 in order to remain competitive with Australia. The exemption was aimed at attracting either new migrants, or Kiwis who had been out of the country for at least 10 years. Therefore, generally speaking, if you fall in either of these categories you should fall within the exemption. If you do fall within the exemption you should not be taxed on your offshore income for a period of 48 months. Note that the exemption does not apply to personal services income. So, for most migrants who fall within this exemption and who come to New Zealand for the first time, you won’t need to worry about tax issues arising from overseas income for the first 48 months. However, you will need to consider the issues once you get close to the 48 months running out.
3 HOW WILL MY FOREIGN SUPERANNUATION BE TAXED?
Regarding the taxation of pensions, if you are a transitional resident you should not be taxed on any pension income for the first four years. However, after that the pension income will be taxed in the usual way. If you are not a transitional resident then your pension income will generally be taxed in New Zealand as you receive it. There are some exceptions to this rule. As for lump sum withdrawals, these are tax free for the first four years whether or not you are a transitional resident. However, if the withdrawal happens after that, then things become a bit more complex. Generally speaking though, you will probably be taxed based on how long you have been in the country before you make the withdrawal. For example, if 5 years, then around 5% will be income, if 6 years, then around 10% will be income, and so on, and taxed at your marginal tax rate.
4 IF I AM A TRANSITIONAL RESIDENT, WHAT DO I NEED TO DO BEFORE MY TIME RUNS OUT? You need to see your tax advisor at least 6 months before your transitional residence expires. If you have offshore assets, like shares or share options, or foreign bank accounts, then planning for the loss of transitional residence is essential. If you don’t plan you are likely to pay more tax than you otherwise would have.
5 S HOULD I BE SETTING UP A TRUST BEFORE I COME TO NEW ZEALAND? Although trusts are useful vehicles for estate and wealth planning, they will usually make your affairs more complicated, and therefore increase your professional advice bill. If your wealth is limited, then a cost/benefit analysis would probably point you in the direction of not having a trust. However, where your wealth is significant you may like to consider the use of a trust, or you may already have a trust, and the question is more about how this trust will be taxed once you come to New Zealand. There are important decisions to make for trusts settled before you come to New Zealand, so care should be taken to discuss this with your advisor early on, preferably before you actually migrate. The above comments are not intended as advice, but as general comments on the issues new migrants to New Zealand will face. Please seek specific advice from your usual Staples Rodway advisor.
There are two issues here: (a) the taxation of pensions; and (b) the taxation of lump sum withdrawals from overseas pension funds.
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Article by Lee Harris STAPLES RODWAY AUCKLAND
NEW CALEDONIA OPEN FOR BUSINESS & PLEASURE
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Lee Harris's recent trip to New Caledonia combined both business and pleasure. The usual image that most people hold of New Caledonia is typical of the other Pacific Islands, but with a French flavour and at a significantly higher cost. The reality is that there are a surprising number of differences which make New Caledonia unique. This is partly due to the strength of New Caledonia’s economy, compared with other Pacific Islands that primarily focus on tourism.
HIGHLIGHT OF THE PERSONAL ASPECT of my trip was time spent at a tiny island just five minutes off the main beach at Anse Vata, with a snorkeling course that exceeded anything we had seen in Fiji or in Rarotonga. The water was teaming with fish, including an inquisitive sea snake and a large shark, and it was like been thrown into the middle of an aquarium. Not surprisingly, île aux Canards / Duck Island is very popular during the weekend, but as we sat on the Monday afternoon on the virtually deserted island sipping our French wine, with the occasional kite surfer with hydro foil technology flying past, it all combined for an unforgettable afternoon. When you add in nightclubs over the sea with fish swimming below, grand cru French wine and French cheese and pastries at a fraction of New Zealand prices, we certainly came away with some unforgettable memories.
It may look like a laid-back idyll, but the blue seas and sandy beaches are merely a facade for a bustling economy.
However the real surprise with New Caledonia is its vibrant economy, largely due to the significant nickel mining. New Caledonia is the 3rd largest producer of nickel in the world, and the nickel industry makes up the significant part of its GDP. Two new mines have recently been constructed, and the poor roading of the areas outside of Nouméa is evidence of the extensive commercial trucking activity. I was initially surprised to find that one of my business meetings would be at 7am, which is the usual start time, but I was even more surprised to find that traffic jams start from 6am, even outside of the main town. New Caledonia is a French territory, but it is autonomous in many areas, including tax. The Nouméa Accord provides that from the beginning of the fourth quarter in 2014 and with the approval of three-fifths of Congress, a date will be set for a referendum on the transfer of the five sovereign responsibilities to New Caledonia. These include foreign affairs and the organisation of citizenship and nationality. If voters vote against the proposals in the first referendum, and provided that one third of the congress agrees, a second referendum will be held. This procedure can be repeated for a subsequent referendum. If the response is still negative, then "political partners" will meet to examine the position. If Congress has not fixed a date for a vote before the end of the penultimate year of the mandate (2017), the French State will do so in the final year (2018). There is therefore an element of economic uncertainty which is encouraging a number of New Caledonians to invest in other jurisdictions, including in New Zealand. As evidence of this interest, ANZ Bank has a representative office in New Caledonia, and there are numerous New Caledonian real estate companies providing services focused on the purchase of New Zealand and Australian property. In fact, investment in New Zealand property amounts for approximately 10% of outward investment for New Caledonians, compared with 40% in total to Australia and Europe, with the major part of this latter percentage being in France.
France and Europe have historically been New Caledonia’s major business partners, which is a factor in New Caledonia being part of 12 regional and/ or international organisations. However, given the current situation with the New Caledonian constitution and the fluctuation in demand for nickel which directly impacts upon their economy, the New Caledonian government has recognised that it needs to place a lot stronger emphasis on trade with its Pacific neighbours if it is to strengthen its economy. They are actively working on developing business links with New Zealand, including the development of a government external trade strategy. To facilitate the development of trade relations in the meantime, they have an official representative, Yves Lafoy, based at the French Embassy in Wellington (firstname.lastname@example.org). This appointment is significant; it is the first time that a French territory has had an official representative in a sovereign state and Yves Lafoy’s presence was a driving factor in five official visits from New Caledonian delegations to New Zealand in the last year. Trade relations include opening opportunities for New Caledonian businesses to develop economic activity in New Zealand. There is already significant exposure to the “kiwi” brand in New Caledonia, and in addition to New Caledonians’ interest in New Zealand real estate, New Zealand products feature significantly in New Caledonia. For example, New Zealand is the second largest provider of food products in New Caledonia, and the fifth largest provider of goods. However, very few New Caledonian businesses are established in New Zealand, or are actively involved in partnerships with New Zealand businesses. Given the high level economic commitment, there is significant potential for this to change. For New Zealand businesses, there is the little known option to include New Caledonia as part of their production process, which can open the door to free access to the European market at preferential tariff rates. New Caledonia, along with other French territories, have an agreement with the European Union that allows an extensive range of products that have been transformed in a prescribed manner in New Caledonia, to then have free access to the European Market, and to also benefit from preferential tariff rates. There are over 30 pages of items that fall within the tariff classifications, including carpet, food, clothing, boats and aircraft. Once products have undergone the appropriate transformation, a movement certificate is issued by Customs, and Customs then declares that the products can be released for free access into the European Union.
By way of example, pastes ( including marzipan) exported directly from New Zealand to France are subject to tariffs at 9%, plus a further agricultural component of up to 18.7% plus an additional duty on sugar content. An indication for these tariffs and duties is in the vicinity of 30%, whereas appropriately transformed products from New Caledonia are subject to tariffs at 0%. When you also take into account that transformation in New Caledonia results in products meeting European standards, there are some very interesting export possibilities to explore for New Zealand businesses.
New Caledonia has many challenges ahead and there are various trade aspects that are not straightforward, including limited businesses that have English speaking capabilities. Staples Rodway can overcome the language barrier with our French speaking staff, and we have professional contacts both in New Zealand and in New Caledonia. New Caledonia has made it abundantly clear that the doors are open for business.
NUMBERS Winter 2014 • 15
AUCKLAND Level 9, 45 Queen St PO Box 3899 Auckland 1140, New Zealand Phone 64 9 309 0463 Fax 64 9 309 4544 email@example.com
WAIKATO 4th Floor, BNZ Building 354 Victoria Street PO Box 9159 Hamilton 3240, New Zealand Phone 64 7 834 6800 Fax 64 7 838 2881 firstname.lastname@example.org
TAURANGA Level 1, 247 Cameron Road PO Box 743 Tauranga 3140, New Zealand Phone 64 7 578 2989 Fax 64 7 577 6030 email@example.com
HAWKES BAY Cnr. Hastings and Eastbourne Streets PO Box 46 Hastings 4156, New Zealand Phone 64 6 878 7004 Fax 64 6 876 0078 firstname.lastname@example.org
NEW PLYMOUTH 109-113 Powderham Street PO Box 146 New Plymouth 4340, New Zealand Phone 64 6 757 3155 Fax 64 6 757 5081 email@example.com
STRATFORD 78 Miranda Street PO Box 82 Stratford 4352, New Zealand Phone 64 6 765 6949 Fax 64 6 765 8342 firstname.lastname@example.org
WELLINGTON Level 6, 95 Customhouse Quay PO Box 1208 Wellington 6140, New Zealand Phone 64 4 472 7919 Fax 64 4 473 4720 email@example.com
CHRISTCHURCH 314 Riccarton Road, PO Box 8039 Christchurch 8440, New Zealand Phone 64 3 343 0599 Fax 64 3 348 0186 firstname.lastname@example.org
16 â€˘ NUMBERS Winter 2014