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No 35 SPRING 2015


RESIDENTIAL PROPERTY INVESTMENT The ins and outs of recent tax changes

DEFLATION Is it really the Bogeyman?

CROWDFUNDING NZ leads the way

Staples Rodway is an independent member of Baker Tilly International NUMBERS Spring 2015 • 1


David Searle


Rosanna Baird (07) 834 6800

(09) 373 1128


Chris Downey (07) 578 2989


Stuart Signal

(06) 878 7004


Chris Lynch

(06) 757 3155


Robert Elms

(04) 472 7219


(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 2 • NUMBER Spring 2015 consult your advisor before acting on this information.

No 35 SPRING 2015

IN THIS ISSUE 2 Residential Property Investment The ins and outs of the recent tax changes

4 Investment Life Stages

Are you prepared for the transition employment to retirement

6 Equity Crowdfunding

New Zealand shows Australia the way

8 Time to Pay the Tax Man

Your tax payment obligations aren't going away

10 Deflation

Is it really the Bogeyman?

12 Liquidations

The sting in the tail if you haven't been paid

14 High Finance and FATCA

The fight against money laundering and the financing of terrorism

16 Fundamentals of Cashflow Forecasting Your new business asset

18 Wholesale Investors

Are you one and are you wealthy & clever enough to forgo investment disclosure?

20 Power to the People

Staples Rodway Human Resources

22 Employee or Contractor? The tax aspects


A model for the Arts

25 Electric Vehicles

Why is New Zealand so slow on the uptake?

In the Winter 2015 issue of Numbers, the email address for the Attaché scorecard in The Times, They Are A-Changin': Business Improvement Tactics & Tips article was incorrect. If you would like to complete the Attaché Scorecard, email with “SR Attaché Scorecard” in the subject line for your free invitation.



The New Zealand residential property market dominates the media, and features in discussions on the economy, and day to day conversation generally. One of the factors often mentioned as contributing to the growth in property values, particularly in Auckland, is the lack of a general capital gains tax. This leads to an expectation that profits on the sale of land and buildings will be tax free in all cases, even though that is not the case.


NDER THE CURRENT RULES, IT is well known that an apparent capital gain can be taxable if the taxpayer acquired the property with one or more purposes or intentions that included the intention of disposing of it. Unsurprisingly, very few people who acquire residential property admit to acquiring it with the purpose or intention of disposing of it, and a lot of resources need to be employed by Inland Revenue when they review whether a gain on property can be taxed under these rules. Inland Revenue monitors land sales and receives automatic information from Land Information New Zealand regarding purchases and sales. This information is used by Inland Revenue to target situa-

tions where, among other things, there has been a short time between buying and selling properties, or where multiple properties are brought and sold by the same taxpayer. Inland Revenue can be expected to follow up when gains on property sales have not been declared in the relevant income tax return. The practical aspects for Inland Revenue of, firstly, being able to obtain sufficient evidence to assess any gain as being taxable and, secondly, of being able to collect the tax payable on any assessment, are challenging. This can be particularly so where the seller is a non-resident and if they have had limited or no interaction with Inland Revenue. The level of resources required to be able to identify, assess and collect

taxes in some cases is significant, and so there have been some major policy changes around the taxation of land, the collection of information and, in the near future, a withholding tax on certain property sales. These rules are either in Bill form, or are the subject of a discussion document, and may be subject to change. We look at the rules as they stand in mid-September 2015.

TWO YEAR BRIGHTLINE TEST The first of these new rules is the two-year ”brightline” test. This applies in addition to the existing rules which tax property that was acquired with the intention of resale. The new rule is that, subject to certain exclusions, if any residential property is sold within 2 years of the date of acquisition, any gain on sale will be subject to income tax. The rule applies to residential land only, which is any land that has a dwelling or which by its nature is capable of having a dwelling erected on it. It does not include any land that is used mainly as business premises or for farming. No work needs to be carried out on the property for the taxing provisions to apply. The land will not be taxed if the property is: ƒƒ The owner’s “main home”; or ƒƒ Is being sold as part of a relationship property settlement; or ƒƒ Is inherited property that is being sold. Under the Bill, to be the main home, a property must have been used predominantly, for most of the time the person owns the land, for a dwelling that was the main home of the person or a beneficiary of a trust that owns the land. The purchase date is the date that the vendor becomes the registered owner of the property. The disposal date is taken as the date on which the vendor and purchaser enter into an agreement for the sale of the property. While these dates are inconsistent with each other, they do provide easier dates for Inland Revenue to police and allow for less manipulation to circumvent the intention of these rules. Deductions would be permitted against the proceeds on disposal, in accordance with the usual tax rules. There are further rules that will apply the brightline test in situations where a land-rich company or trust has held land for less than two years, and there is a change in shareholding or the trust deed changes so that the economic effect is the same as the sale of land. If there is a loss on the property that is subject to the new rules then the loss is “ring-fenced” and can only be used against any future gains on property.

NEW DISCLOSURE AND IRD NUMBER RULES There are also additional information disclosure requirements being introduced, also with effect from 1 October 2015. Under these requirements, buyers and sellers of property will be required to provide their IRD numbers at the time property is transferred. Those who are tax resident in another country will also have to provide their home country tax identification number. There will be no requirement to provide these details when the property is being purchased by a New Zealand resident individual who will use the property as their “main home” or, for

the vendor, where the vendor used the property as their “main home”. New Zealand residents will therefore have to provide their IRD number if the home is not their “main home”. This also means “overseas residents” will be required to obtain an IRD number to purchase a property. They will also be required to open a New Zealand bank account to obtain this IRD number. This means those people will have to go through the identity verification procedures that banks have to comply with under the anti-money laundering rules. New Zealanders who have been outside New Zealand for three or more years will also be labelled as “overseas people”, as will holders of residence class visa who have not been in New Zealand within the previous 12 months. Vendors and purchasers will need to provide specific details at the time of sale otherwise the change in title will not be registered. This information will only be available to the government departments involved, and not the general public. The penalty for knowingly providing false information is proposed to be a fine of up to $25,000 for the first offence, and up to $50,000 for any other offences.

RESIDENTIAL LAND WITHHOLDING TAX We now have the opportunity to learn a new acronym – at this stage the acronym is RLWT, or residential land withholding tax. An officials’ issues paper was released in August 2015 setting out issues connected with RLWT and seeking submissions on its practical operation. The following provisions are therefore not yet law but, subject to any major issues being raised in the submission process, are likely to be enacted along the lines set out below. The withholding tax is planned to apply on sales of residential property from 1 July 2016 when: a) The vendor is an “offshore person”; and b) The property has been owned for less than two years. The proposed amount of the withholding would be the lower of: ƒƒ 33% of the vendor’s gain on sale (proceeds on sale less purchase price – this would be nil if there was a loss); or ƒƒ 10% of the total price paid by the purchaser The onus for enforcing these rules will fall on the solicitor or conveyancing agent involved in the property transaction, with primary obligation likely to rest with the purchaser’s conveyancing agent. The withholding agent would be entitled to rely on a statement provided by the vendor, unless they know it to be false. In that case, the withholding agent would be required to withhold and pay RLWT to Inland Revenue. RLWT is not intended to be a final tax, so the vendor could file a New Zealand tax return to claim other expenses, apply the correct marginal tax rate, and claim a credit for the tax withheld. These new tax and compliance rules will add a whole new level of matters to be dealt with in residential property transactions, in relation to any situation where the property is not your “main home”, and care will need to be exercised from 1 October. The comments above are general and are based on legislation that is not yet law. As always, please obtain advice on any of the matters above as application to specific situations will vary. NUMBERS Spring 2015 • 3

INVESTMENT LIFE STAGES How well prepared are you for the transition from employment to retirement?



HETHER WE CALL IT GROWING up or growing old, our needs, desires, and circumstances will inevitability change as we move through life. We survived childhood, the teenage years, and matured into adults. But while we’re older, wiser and have tales to tell, our biggest challenge may still be ahead. Very early in my career I met someone whose thoughts on retirement became entrenched in my thinking. His observation was that priorities change dramatically once you retire based purely on your inability to replace what you spend. Every decision regarding expenditure now required more consideration than before. If we’re lucky and have enough put aside to make these decisions less onerous, that’s great, but the reality for many is that we are not as prepared as we think. While it is never too early to start planning, it is often too late. With that in mind, it’s useful to recognise where we are in the life-stages of investing and to plan accordingly. Fundamentally there are three main phases in an investor’s lifecycle. These are:







ACCUMULATION The accumulation phase should begin while we are young adults and extend through into our 40’s. It begins with short term goals like houses, cars and lifestyle assets and, as we get older, include longer term goals such as retirement savings. We borrow funds to purchase assets and loan repayments are a significant financial outlay. Our ability and propensity to take risks is high because we don’t feel constrained by short term expectations and our income and time will help us overcome any set-backs we encounter.

CONSOLIDATION Typically this phase begins somewhere in our 40’s or early 50’s. Our income is peaking and debt is either repaid or becoming less of an issue. Net wealth is growing rapidly and with more or less 20 years to retirement, some risks can still be accepted but a natural tendency is to become more risk adverse as we look to protect what we’ve achieved.

SPENDING This begins at retirement. Income has declined and we must now look to our savings to support our lifestyle. We accept we can’t take the same risks we took in building wealth, however

there are still risks outside our control such as inflation and we must work to protect the purchasing power of our income. Logically, the life-cycle seems obvious and we would expect to progress naturally towards an adequate if not comfortable retirement through our endeavours. However, if we look closer at the phases, there are a number of significant challenges along the way. If I reflect on my own experiences and of those around me, we all settled down and started families later than previous generations. We have greater lifestyle expectations whether that be overseas holidays or the latest gadgets. The accumulation phase started more in the 30’s than in the 20’s and this is significant because the 25 year mortgage (assuming we didn’t buy the bigger better house along the way) hasn’t gone by 50 but more like 60. Our children are still living at home as we hit 50 and it is only with hope we will see them fully independent in the next few years. Consolidation… I wish! The future now looks like 5-10 years of really hard work to fund 30 years of retirement. Will KiwiSaver save the day! KiwiSaver came too late to save my generation, and while a huge step in the right direction it needs to be recognised it is not the complete solution. Consider also that we can’t expect National Superannuation to continue at present levels or with the same eligibility age. Another factor is that property ownership helped our parents build wealth and is part of the national psyche, but with property ownership looking increasingly challenging, will we be able to follow the previous generation’s example. Most of the goals we set can be reached easier if we work to a plan. Plans help avoid risks and keep us focused. You wouldn’t build a house without a plan and planning for retirement is a similar sized commitment. You’d also have your house inspected during the build to ensure compliance with codes and building regulations, and an investment strategy is no different and also needs to be regularly reviewed. Like building a house, making the most of your investments is full of challenges but Authorised Financial Advisers (AFA’s) are here to help. Staples Rodway Asset Management Limited is a boutique investment advisory service who specialise in providing personalised and impartial investment solutions for individuals and trusts. For a no obligation discussion with one of the Authorised Financial Advisers from Staples Rodway Asset Management (SRAM) please email or phone 09 309 0491. More information is available on the Staples Rodway website at under the “Investments” tab. NUMBERS Spring 2015 • 5

EQUITY CROWDF NEW ZEALAND SHOWS AUSTRALIA THE WAY One of the uses of the internet and social media has been the ability to connect those who require funding for business and other activities with those who have funds available that they are willing to invest.


N THE UNITED STATES, WHERE crowdfunding has been available for over 10 years, the initial reward- and donation-based approach has evolved to cover many situations, including raising funds to assist charities (worthy or otherwise) or even Star Citizen, a video game that raised over US$80 million. In Greece a campaign was undertaken to bail out the country using crowdfunding with almost €600,000 being raised in three days from 35,000 people – it wouldn’t have been possible without social media. The most recent evolution of this funding approach is equity crowdfunding, which is simply where investors provide funds to companies in exchange for shares or other equity instruments. The concept is spreading widely, and has quickly become everyday parlance in New Zealand, where raising capital for growing businesses has traditionally been a challenge. Parliament has responded to the opportunity and incorporated lighthanded regulation for equity crowdfunding, now overseen by the Financial Markets Authority. New Zealand rules enable up to $2 million of capital to be raised (in a 12 month period), which is very attractive for businesses that require an injection of capital. High-growth businesses use a lot of shareholders’ capital to maintain cash-flows and can often be undercapitalised; crowdfunding can be attractive to investors willing to bear the risk and fund these businesses’ growth. Funding can be obtained without the usual cost and difficulties that come with traditional capital raising. Crowdfunding must be done via a licensed crowdfunding service provider website if seekers of capital want to take advantage of the lighter disclosure obligations that apply to crowdfunded share offers. A number of early implementers are already operating in this space, and providing a platform for business seeking funds; Equitise ( is one such example. Staples Rodway Director Phil Pavis has been assisting the platform, primarily assisting with Inland Revenue compliance and record-keeping, which are necessary for any new business. Equitise maintains its accounting records on Xero and, being cloud based, the information can be accessed when required from New Zealand, Australia or anywhere else in the world, as managers stimulate interest in the opportunities. GST matters need to be considered as well. Raising

funds is often considered as more of a financial service with no GST, as compared to dealing in traditional goods and services on which GST is payable. The GST implications can be different for crowdfunding where GST can be payable on funds from “rewards-based” crowdfunding, but may not be on the proceeds of an equity raising. Staples Rodway has provided other practical support to Equitise, including undertaking to conclude any capital-raising process in the unlikely event the crowdfunding platform cannot. A typical capital-raising runs for 30-90 days and Equitise charges a percentage of the funds raised. Costs are kept to a minimum with social media providing affordable word-of-mouth communication. Start-up businesses wrestle with cash-flow and trading losses and Staples Rodway has been helping clients manage these issues for years. The issues are the same in the equity crowdfunding space but it means smaller businesses may succeed where they can prove viability before falling victim to the age-old problem of limited cash-flow. New Zealand is showing Australia the way; crowdfunding, like many innovations, is having its path forged in New Zealand before it is adopted across the Ditch. Equitise has a strong Australian connection, being backed by both an ASX-listed company and an Australian venture capitalist. And, as a forward thinker, it has been consulting with the Australian Government in anticipation of Australia passing legislation that allows equity crowdfunding. The experience in New Zealand has helped shape Australia’s legislation and will place Equitise in pole position in Australia when the market launches. In the short time crowdfunding has been in New Zealand it has provided investors with the opportunity to back diverse business opportunities such as breweries, a digital travel guide, and a Lee Tamahori movie. Investors have a unique opportunity to provide funding and participate in ownership of businesses they may otherwise never hear of or which, up to now, only wealthy angel investors and venture capitalists have had access to. Clearly, investors must carry out due diligence before making an investment decision as not all investments will be successful, and advice should be taken if opportunities in this space are being considered.




Some businesses appear hopeful, and sometimes even adamant, that by ignoring the proverbial “Tax Man�, their tax payment obligations will go away. A number of New Zealand businesses have already mistakenly made this assumption and have suffered significant penalties as a consequence. But why? We look at why small businesses cannot afford to bury their heads in the sand.

$1500 DEBT

$1587 DEBT

$1643 DEBT

Add in a late filing penalty (upwards of $250) for every return not filed by the due date, and we begin to understand why so many businesses are sent into liquidation by the IRD. If a business is unable to meet a tax obligation, whether it is PAYE, GST or income tax, it is imperative that the business still files a return by the due date. This will at least save a late filing penalty.

“GIVE ME A BREAK” If a business winds up in this situation, all is not lost. The IRD is obliged to consider providing financial relief to tax payers if a proposal presented to them is likely to maximise the recovery of outstanding tax as opposed to other options available to them (e.g. liquidation).

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Another form of relief can be to write off the core debt or penalties. The best person to do this is an accountant who will prepare a proposal setting out a strong case as to why the business is in arrears, what the future looks like, and under what basis the IRD should consider a write off as relief.

$1729 DEBT

$1913 DEBT

$2330 DEBT

However, the IRD is becoming less accommodating in considering financial relief and accountants now need to prepare very strong arguments to support a request for relief. With total debt owed to IRD having more than doubled in nine years (see graph above), the IRD are taking serious measures to either collect debt or write it off as uncollectable. In doing so, a lot of taxpayers are being taken out of business.

GET ADVICE If this sounds familiar, I encourage you to get advice. Talk to your bank. Talk to your accountant. There can be a light at the end of the tunnel if you are proactive about managing your IRD affairs. There is NO light if your head is in the sand!

NUMBERS Spring 2015 • 9








The “pain” that IRD can inflict comes initially in the form of use of money interest and late payment penalties. With an interest rate that has just increased (from May 2015) to 9.21% and a punitive penalty regime that sees a 1% late payment penalty inflicted the day after the due date, followed by a 4% penalty six days later, and 1% per month thereafter, the business owner can end up paying approximately 25% in one year due to penalties and interest. This is a heavy burden for a business that is already under cashflow pressure and a further 25% added to a tax bill will be a greater cost than what suppliers may enforce. The graph below highlights how penalties and interest can quickly add up even when dealing with a relatively small tax obligation of $1,500.




One form of financial relief available is to enter into an Instalment Arrangement where the tax can be paid over a number of instalments, and over a time period that can be negotiated. If the business is proactive and can pre-empt that it will be unable to meet a pending deadline, it must contact the IRD BEFORE the due date and arrange an instalment. Even confirming an instalment ON the due date will incur a 1% penalty. If the business has fallen behind on some taxes, agreeing an instalment plan will stop the penalties from being charged monthly and only interest will be charged.


HY DO SO MANY BUSINESSES pay the IRD late? They may see the IRD as a faceless government corporation that they do not necessarily have a strong relationship with. It makes more sense to the business owner to stay current with suppliers or subcontractors who they do business with on a regular basis. That way the business owner can be guaranteed to continue trading with the support of these connections. If a business owner falls behind on payments to suppliers, they will usually receive a chase-up phone call, as opposed to the IRD who will only send a letter which can be easily ignored. Unfortunately, the pain that follows late and missed payments to the IRD can be widespread and devastating to a business. Here are a few reasons why it is important to pay the “Tax Man” first and foremost.




IS IT REALLY THE BOGEYMAN? We are so used to hearing about inflation, and the concern about the effects of the inflation rate being too high, that it takes some adjustment to recognise that the risk of deflation has become more prevalent globally over the last several years.



SIMPLE DEFINITION OF DEFLATION IS when the inflation rate falls below 0%, giving rise to a negative inflation rate. Inflation reduces the real value of money over time; conversely, deflation increases the real value of money – and the currency of a national or regional economy. This allows one to buy more goods with the same amount of money over time. Economists generally believe that deflation is a problem in modern economies because it increases the real value of debt and may aggravate recessions. While inflation (if controlled) implies continuing economic growth and increasing incomes, the opposite is the fear of a deflationary spiral which occurs where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price. The worst example of this was the worldwide Great Depression of the 1930s when rapid deflation, together with other monetary supply factors, brought catastrophic change to millions, rich and poor alike. However, deflation does not always produce a bad economic outcome. During the late 19th century/early 20th century, America enjoyed real economic growth while in an era of mild price deflation. Realistically, can you imagine consumers and savers globally being against having their income and savings stretching further? Is the opposite really an attractive option, having their real income decline and the value of their savings being eroded by inflation? Japan has been in deflation for a couple of decades yet life is not bad in Japan. There is no sense that Japan is suffering through two decades of depression like that experienced in the 1930s. Governments appear to like the concept of inflation and have empowered Central Banks to actively maintain a minimum level of inflation. This provides for continually increasing their tax take as it increases taxable incomes and pushes more and more wage and salary earners into a higher marginal tax bracket. The devaluing of currencies caused by inflation also means that the true value of the government and private debt is being eroded. This is why central banks typically aim to maintain a low level of inflation. In New Zealand, the Reserve Bank Policy Targets Agreement has a target of annual increases in the consumer price index (CPI) of between 1 and 3 percent. Focus is usually on the top end of the range, but the requirement for a minimum increase in CPI is seen as equally important. Why are we led to believe that inflation is good and deflation is bad? Who are the promoters of this proposition? It is suggested that consumers would stop spending if prices are falling. The theory is that the consumer will hold off making a purchase decision because they know that the particular item will get cheaper the longer they hold off making the purchase. This would then work through the entire supply chain and the economy would grind to a halt. This sounds fine in theory but if it is true why are big screen TVs, smart phones, tablets and computers still being sold when new models are faster, have more features and are cheaper than the previous models?

The argument is also promoted that falling prices would mean lower profits for businesses and this would flow through into lower wages for workers. But in a period of deflation, when prices are lower, workers should not, in theory, be disadvantaged by this. There is one large section of society that finds the thought of deflation abhorrent and they are the borrowers, both private and public. The repayment of large debts becomes extremely difficult if the real value of those debts were to increase. The three options for clearing debt are to repay it, have it written off or inflate it away. With the huge overhang debt held globally, private and public, the third option appears to be the easiest and least painful way out. The question then has to be asked, why were such questionable amounts of debt taken on in the first place? The present consumption of future income will inevitably come at a price. Jim Rickards, author of “The Death of Money” and “Currency Wars” provided one view of why governments and hence Central Banks do not want deflation. Deflation also destroys government tax collections. If a worker makes $100,000 per year and gets a $10,000 raise when prices are constant, that worker has a 10% increase in her standard of living. The problem is that the government takes $3,000 of the increase in taxes, so the worker only gets $7,000 of the raise after taxes. But if the worker gets no raise, and prices drop ten percent, she still has a ten percent increase in her standard of living because everything she buys costs less. But now she keeps the entire gain because the government has no way to tax the benefits of deflation. In both cases, the worker has a $10,000 increase in her standard of living, but in inflation the government takes $3,000, while in deflation the government gets none of the gain. A recent example of beneficial price deflation is the price of oil and the impact that a dramatic drop in price has created. In the US petrol prices are now 25% cheaper. Initially US consumers increased their personal savings but now that there is a sense that lower petrol prices are likely to last; consumers have started to spend the savings. This is helping to dispel the post-GFC blues and stimulate the US economy, which traditionally has been 70% based on consumer spending. Continuing economic uncertainty provides further fuel for testing different theories about the overall effects of deflation. Hopefully this won’t be at the cost of real pain for those who are the subjects of that testing. Staples Rodway Asset Management Limited is a boutique investment advisory service who specialise in providing personalised and impartial investment solutions for individuals and trusts. For a no obligation discussion with one of the Authorised Financial Advisers from Staples Rodway Asset Management (SRAM) please email or phone 09 309 0491. More information is available on the Staples Rodway website at under the “Investments” tab. NUMBERS Spring 2015 • 11


THE STING IN THE TAIL EVEN IF YOU HAVE BEEN PAID Recent court cases have clarified the grounds on which liquidators can recover funds from creditors. Anyone in business who has concerns about the financial strength of their customers should make sure they are familiar with the issues.

Article by Donna Hossack STAPLES RODWAY HAWKES BAY


USINESSES OFTEN RUN THE RISK of dealing with customers and clients who may not be able to pay for the goods or services they have acquired. In extreme cases those customers may go into liquidation, with the liquidator seeking to recover any funds available to the creditors of the delinquent business. The liquidator has the power to examine who has actually been paid by the business before it went into liquidation and “claw back” some of those payments to be distributed to other creditors. For example, if you have received a payment for a debt owed to you by a customer who soon after goes into liquidation, the payments you received could be payable to the liquidator. Payments able to be recovered by liquidators are known as “voidable transactions”. For those in the construction industry, note that this is a different issue to the recently announced changes in respect of retention money on construction contracts having to be held on trust from 31 March 2016.

VOIDABLE TRANSACTIONS Voidable transactions are transactions made up to two years before a company goes into liquidation, if certain conditions are met. The aim of this provision is to ensure that creditors (who fall with the same class of rights) are treated equally. A payment could be at risk of being clawed back if it was made when the company was unable to pay its debts and allowed someone to receive more than they would have during the course of the liquidation. Given that most companies are insolvent for some time before going into liquidation this can make many payments made to creditors at risk of being clawed back.

RUNNING ACCOUNT Where a continuing business relationship exists, the amount owed to a creditor is likely to fluctuate over a period of time. In this situation, a lone transaction cannot be singled out by a liquidator. Under the ‘running account’ provision, all transactions during the period are netted off with the end result being treated as if it were a single transaction. Until recently, it has not been clear as to when the ‘running account’ should start.

PEAK INDEBTEDNESS Liquidators have generally selected the date when the indebtedness was at its highest as the starting point for determining the net result of a ‘running account’. For example, if an amount owed to a creditor (during the two years prior to liquidation) peaked at $100,000, but the amount owed at the time of liquidation was $40,000, then a liquidator may argue that the $60,000 that had been paid during that time is voidable and must be repaid by the recipient. This approach results in the liquidators being able to maximise a claim against a creditor.

The Court of Appeal ruled in April 2015 that this approach was “not part of law in New Zealand” and liquidators could not choose the point of peak indebtedness as the starting point of a ‘running account’. The Court decided that all transactions within the specified period (up to two years) should be included as part of the running account. Continuing on from our example above, if the amount owed to the creditor at the start of the specified period was $50,000, then there has been a net payment of only $10,000 that may be at risk of a claim from a liquidator. If the company was solvent at the beginning of the specified period then arguably the starting point of a ‘running account’ should be the date the company could no longer pay its debts as they fell due.

DEFENCE AVAILABLE TO CREDITORS The voidable preference provisions try to ensure that creditors are treated equally. The Supreme Court has pointed out that fairness to individual creditors is important given that New Zealand has a high proportion of small businesses and there are risks to commercial confidence of “normal, everyday commercial transactions” being set aside at a later date. A creditor can defend a claim made by a liquidator if they can prove: (a) they have acted in good faith; and (b) they did not suspect, or have reasonable grounds for suspecting, that the company was insolvent; and (c) they gave value for the payment or altered their position in the belief that the payment was valid and would not be set aside. In a decision of the Supreme Court in February 2015 it was determined that it was enough for a creditor to have given value at the time of the original transaction, not at the time of payment (as had been earlier decided by the Court of Appeal). It should now be easy to fulfil the ‘gave value’ element to a defence given that payment will be for an earlier supply of goods or services.

ACTING IN GOOD FAITH Creditors need to remember that they must also be able to prove that they received the payment in good faith and had no suspicion, or reasonable grounds to suspect, that the company making the payment was insolvent. It is also important to note that a creditor will struggle to prove they had no grounds to suspect the company was insolvent if they have sent outstanding invoices to debt collectors or taken legal action to recover the amount owed. It is therefore important to have good credit management procedures in place to minimise the risk of a voidable transaction claim. Please talk to your usual Staples Rodway advisor if you have any concerns about the risk to payments you have received. NUMBERS Spring 2015 • 13

HIGH FINANCE & FATCA THE FIGHT AGAINST MONEY LAUNDERING AND THE FINANCING OF TERRORISM Money laundering is perceived by most as being in the realm of Mafia dons and a world away from New Zealand. But today a financial transaction as routine as opening a new bank account is complicated with reams of paperwork, thanks to the introduction of regulations to stem the tide of international money laundering. How does these work and how can it affect you?

Article by Sybrand van Schalkwyk STAPLES RODWAY TAURANGA


F YOU HOLD ACCOUNTS IN the name of a trust, or if you invest in United States (US) equities or bonds, you should read on, as the changes to New Zealand’s law as a result of the US Foreign Account Tax Compliance Act , or FATCA for short, will impact you in one way or another, if it has not already. Those who are US citizens, or those with direct investments in US equities have no doubt already been asked for their details and to confirm their US tax-filing position. But now New Zealand banks are having to request further information from their customers, particularly for accounts and investments held by trusts, to confirm whether or not there is a US connection that results in FATCA compliance issues.

WHAT IS FATCA? Unlike other countries who tax people who are tax resident (a special definition only used for tax purposes), the US taxes its citizens on their worldwide income, whether or not they live in the US. It is fair to say that the US has not been as successful in collecting this tax as it would have liked to be. In response to the shortcomings of the US Internal Revenue Service (IRS) enforcing its tax laws overseas, the US has entered into treaties with many countries whereby the US requires those countries to obtain information about anyone that could possibly be subject to tax in the US. The IRS collects this information and cross references this against its database to see whether all income has been returned as is required. In the New Zealand context the treaty containing the information gathering powers entered into force on 30 June 2014, but New Zealand institutions were effectively exempt from complying with requirements until 31 December 2014. Starting from 1 January 2015 affected financial institutions are required to register with the New Zealand IRD (acting on behalf of the IRS) and provide them with certain specified information on a regular basis. The FATCA rules therefore have three major implications: a) t he rules require NZ financial institutions to report to the IRS/IRD on the income of US citizens (subject to an exemption if accounts held are of less than US$50,000 in value); b) US citizens will have the income from non-US sources provided to the IRS, and cross checked with their US tax returns (subject to exemptions); and c) persons who have no connection with the US may be impacted by the disclosure, withholding and compliance provisions inherent in FATCA. It is the latter of these three implications that the rest of this article focuses on.

HOW DO THESE RULES AFFECT NEW ZEALANDERS WITH NO CONNECTION TO THE US? New Zealand banks are required to review new and existing accounts to look for any indication a customer may be considered a US person and therefore have FATCA compliance requirements. If there is any indication an individual has a US connection, you can expect to be asked about this by your bank. In addition, information will be requested where it is unclear whether or not there is a US connection, such as when a family trust has a bank account and the identity of beneficiaries may be

unknown to the bank. Personal information about non-US persons is not reported to the IRS, except where they do not provide information requested in relation to FATCA. This information gathering exercise also indirectly helps the banks comply with their anti-money laundering obligations, which is where the fight against financing terrorism comes in (although collecting tax from non-complying US taxpayers arguably directly funds the fight against terrorism as well).

WHAT ABOUT IF YOU ARE A NEW ZEALANDER WITH SOME EQUITIES OR BONDS IN THE US? Where you or your financial intermediary choose not to comply with FATCA, and do not disclose the information to the IRD/IRS, a 30% penalty could be applied to US sourced dividends, interest and in some cases, any proceeds from the sale of shares or bonds. In other words, the full amount remitted for the sale of US shares or bonds could be subject to the 30% withholding. Under the New Zealand/US Double Tax Agreement the maximum tax the US can withhold on dividends is 15%, and on interest it is 10% and, unless you have a permanent establishment in the US, 0% on remittance of gains. However, FATCA ignores these maximums because the withholding is not a tax but a penalty. The consequence of this is that the New Zealand IRD will not give a credit for the 30% penalty against the New Zealand tax payable on that income, whereas a credit is generally available for tax withheld. This means that for people investing in the US they could face an effective tax rate of up to 53%. That is, on top of the FATCA withholding of 30%, they could be taxed in New Zealand on the net proceeds at up to 33% (assuming they are on the top marginal tax rate). The investment in the US will need to show a remarkable return in order for it to make it a good investment after this level of taxation. Some commentators have suggested that FATCA is inconsistent with the Double Tax Agreement we have with the US but, even if this is the case, there may be no real remedy for the ordinary mum and dad New Zealand resident investor. It may be possible to file a return in the US to obtain a refund of the over withheld amount, provided that the required information is provided to the US IRS. However, in the majority of cases the costs of doing this may be less than the benefit. Another course of action is to seriously consider whether you need US bonds or equities as part of your investment portfolio. As a first step you may decide to discuss the issue with your investment advisor, and make sure to ask them about the withholding rate on income from the US, or if the issue is simply resolved by being able to disclose the appropriate information.

CONCLUSION FATCA is a far reaching unilateral action by the US aimed at collecting a greater amount of tax. Arguably it is a solution to a problem that could be better solved by more fundamental reforms to the US tax system. FATCA will affect you if you are a US citizen or tax resident or, simply from a disclosure perspective, if you are a non-US citizen or non-US tax resident, whether or not you invest in equities and debt in the US.

NUMBERS Spring 2015 • 15



Financial modelling can be a real asset to a business. When done well, it offers greater visibility of a business’ cashflow requirements, provides clear data to potential users, and allows meaningful action to be taken sooner.

Article by Tracy Hickman STAPLES RODWAY AUCKLAND


HOROUGH PREPARATION IS THE SECRET to success: gather good raw data, consider your audience and tailor the output to meet their needs. Here are some fundamental steps to help develop a solid cashflow model: 1. Determine the purpose by assessing what the forecast cashflow model will be used for. Consider the information needed to support that use and determine what assumptions are key. 2. Set the timeframe ƒƒ Short-term cashflow forecasts can assist businesses unable to pay debts or undergoing change by identifying funding shortfalls. In conjunction with longerterm forecasts, they should facilitate negotiations with funders and creditors to establish arrangements, providing breathing space until new funding or restructuring takes place. ƒƒ Medium-term cashflow forecasts can support business cases when there are short-term issues; they can also be used to determine funding requirements and support decision-making. ƒƒ Long-term cashflow forecasts support strategic planning, allowing business acquisitions, divestments or organic expansion plans to be modelled. They are also useful to show funding requirements for capital raising or to calculate free cashflow for business valuations. 3. Identify the users ƒƒ Internal users, such as business owners and the board, typically require a higher level of detail to ensure they have a thorough understanding. They will be interested in cash requirements and the effectiveness of the current business model (especially if cash is very tight) to determine if the business is sustainable longer term and to aid strategic decisions. ƒƒ  Funding providers, such as bankers and investors, focus on the business debt requirements, debt servicing ability, and key ratios or covenants. ƒƒ  External stakeholders, Inland Revenue for example, want a viable plan to clear outstanding debt; it should demonstrate that commitments, such as payment plans, can be met and that the business model is sound. 4. Gather the data for cashflow modelling assumptions ƒƒ Split sales revenue data into confirmed and unconfirmed sales, to understand the risks of not achieving forecast. Confirm the timing of cash receipts. ƒƒ For cost of goods sold, allow for potential price/wage rises, changes in product mix, foreign exchange impact of overseas purchases and review opportunities for cost savings. ƒƒ For expenses, check for any cost reduction initiatives and changes planned in staffing levels. Review items such as marketing from a zero-base perspective. Confirm the timing of cash payments. ƒƒ Check financing alternatives for capital expenditure (lease or buy) and timing of deposits or final payments. ƒƒ Estimate working capital, including debtor and creditor balances, work in progress and inventory levels.

ƒƒ E  stimate interest rates and potential funding facilities, debt repayments (and effect on interest). ƒƒ Calculate taxation payments or refunds, particularly for GST and income tax. ƒƒ  Determine owner/shareholder cash requirements, such as drawings and dividends. 5. Choose a software solution that allows you to spend time populating the model rather than building it. Ensure the model operates efficiently, transparently, logically and, most importantly, ensure clear separation of assumptions and outputs. Error checks are important and should be included as a key element. 6. Prepare a model with integrated forecast financial statements, comprising a cashflow statement showing the movement in cash, an income statement showing profitability and a balance sheet reflecting the same closing balance of cash and net asset balances. Use a 12-week timeframe for short term, 12-24 months for medium term and three years or more for long term. 7. Critically review the forecast results, especially where cash is very tight. If your output is to be dual purpose, use scenarios to prepare an aspirational forecast for your budget and a realistic forecast to assess cashflow. Use sensitivity analysis with best, base and worst scenarios that show the effects of changes to key income or expenditure to stress test the model. Staples Rodway financial modelling services can help with your cashflow forecasting, business planning and reporting. All of the major banks are familiar with the reporting outputs and have found them helpful to support funding decisions. For further information or advice, please contact your usual advisor or call Tracy Hickman on 09 373 1133 or email

STAPLES RODWAY FINANCIAL MODELLING SERVICES PROVIDE… ƒƒ R obust forecasts enabling greater clarity and control over decision making. ƒƒ  3-Way integrated income statement, balance sheet and cash flow statement. ƒƒ An expert multi-disciplinary support team trained to produce high quality, low risk and excellent value models. ƒƒ  Models built with an add-in to Excel based software, producing models that are easy to understand and use, and quick to build. ƒƒ Easy importing of actual data into the model from any software, making regular reporting simple. ƒƒ Assumption inputs that are clearly separated from report outputs, making it very straightforward for you to amend the assumptions.

NUMBERS Spring 2015 • 17

WHOLESALE INVESTORS Are you one and are you wealthy & clever enough to forgo investment disclosure? Before you fly too close to the sun, we outline the perils that could lead you plummeting back down to earth.

Article by Tracey Cross DLA PIPER


AWS GOVERNING THE DISCLOSURES THAT must be made to investors in connection with an offer of financial products have always differentiated between the information needs of 'retail investors' and the needs of those investors that are big enough, ugly enough and sufficiently experienced or well off to fend for themselves. In the old world of the Securities Act 1978, exclusions exist for private offers to 'habitual investors' and 'wealthy persons'. In the new world of the Financial Markets Conduct Act 2013 (FMCA), effective from 1 June 2015, there are several exclusions from the disclosure requirements that would ordinarily attach to an offer of financial products. This article discusses the exclusion that applies when offers of financial products are made to 'wholesale investors'. A person is a wholesale investor if they are: ƒƒ An 'investment business'; ƒƒ Meet the 'investment activity criteria'; ƒƒ 'Large'; ƒƒ A 'government agency'; ƒƒ An 'eligible investor'; ƒƒ Required to pay a minimum amount of at least $750,000 on acceptance of the offer. While the majority of the categories of wholesale investor are clear because the definitions are precise or require specific values of net assets, income or portfolio value, a more involved self certification regime exists for persons who might be eligible investors, and therefore meet the definition of a wholesale investor under that criteria.

SELF-CERTIFYING & PROFESSIONAL CONFIRMATION To qualify as an eligible investor these investors must certify as to their previous experience and give grounds for that certificate. The certificate then needs to be confirmed by an Authorised Financial Adviser (AFA), a chartered accountant, or a lawyer. An eligible investor certificate cannot be used in respect of any other wholesale offer. As these certificates have a two year shelf life, the investment must be made within that time, and cannot be relied on if the offeror knows that the investor did not in fact have the required previous experience when the certificate was confirmed. In addition, an offeror cannot rely on an eligible investor certificate if the offeror knows or has reasonable grounds to believe that the AFA, chartered accountant or lawyer confirming the certificate was an associated person of the offeror. While an offeror does not have to independently verify the information in the certificate as correct, they must have no reason to believe that the information is incorrect.

WHAT IS NEEDED TO BE AN ELIGIBLE INVESTOR? To qualify as an eligible investor, a person must have previous experience in acquiring or disposing of financial products, which allows them to assess a number of factors including the merits and risks of the offer and their own information needs. Simply attending training (irrespective of the nature and quality of that training) is not in itself sufficient because the person

cannot be said to be experienced in the acquiring or disposing of financial products and cannot then certify themselves as an eligible investor. After a person has experience in acquiring or selling financial products, it is up to that person to determine whether those acquisitions or disposals have given them sufficient experience to sign an eligible investor certificate. An eligible investor certificate can only be signed if the person believes they have sufficient experience to assess the factors detailed under the Act, with the grounds for the certification set out in the certificate.

CONTROL YOUR EGO The danger is for a person's ego to run riot in assessing (or in fact being told) he or she is wealthy or clever enough to be categorised as a wholesale investor without appreciating the consequences of such an action. There are risks in not obtaining the standard disclosure a retail investor would expect to receive with the person categorising themselves as a wholesale investor not having access to a complete and balanced set of information in relation to the offer. In addition, the wholesale investor may not have the benefit of other investor protections, given that the offer may be subject to less regulation and governance than would otherwise be the case. This may be acceptable in some circumstances, but not all. If you are considering categorising yourself as a wholesale investor you should ensure you clearly understand the category under which you are saying you qualify, or that you are certifying you fall into. If the certificate simply refers to the definition of the category of wholesale investor under the Act, request the detail of this to ensure you qualify. The eligibility requirements under the FMCA have changed from that of the Securities Act regime. Also ensure you are receiving and understand the warning statement required to be given to eligible investors. We are generally seeing a mixed bag as to the quality of eligible investor certificates so ensure you check the detail. While you are able to opt out of being treated as a wholesale investor, or can revoke your certification as an eligible investor at any time, we recommend you consider carefully your original certification in the first instance, seeking advice before committing yourself. Your usual advisor or the team at Staples Rodway will be able to assist you in this regard.

As accountants we are increasingly being asked to certify that our clients meet the eligible investor category requirements. The rules are not straightforward and we ask our clients to understand that we take this certification seriously. We need to assess your position and discuss with you whether you do in fact qualify as a wholesale investor, and the implications of having this status." Sharon Norman STAPLES RODWAY AUCKLAND

NUMBERS Spring 2015 • 19



What do human resources and accounting have in common? Plenty, according to Julie Rowlands, who heads Staples Rodway’s Human Resources and Organisation Development consulting team in New Plymouth. Julie firmly believes that a successful business requires two key ingredients: first, it needs a sound financial base; second, it should be heavily infused with outstanding people, and people practices that support excellence.

While Auckland has offered HR consultancy services at various times to clients on an as required basis, due to clients increasingly wanting practical HR advice, Chris Wright has been appointed to lead Auckland’s HR Consultancy. Chris has held senior HR positions across a range of industries including health, education, law, financial services and sales. Auckland is now able to offer a significant range of HR services, aimed at our clients needs, with a strong commercial focus. These include recruitment and selection, employment relations advice, remuneration strategy, employment agreements, health checks on HR systems and processes, engagement strategies, restructuring and performance management. Our objective is to provide clients with cost effective independent HR advice on people related issues when they require it whether that be starting a new business or managing that tricky performance issue. As with the HR consultancies across the other Staples Rodway offices Auckland’s HR services are available to businesses who are not clients of the firm. Chris Wright can be contacted on 09 373 1101 or by email


TAPLES RODWAY’S HR CONSULTING PRACTICE was first established in 2005. It was a natural progression for the accounting practice: increasingly, clients were looking beyond their financials to their ‘people’ component to help make their businesses stronger. The firm’s first steps into HR were modest, offering support with employment agreements, compliance and legislation. Today, the HR arm’s focus is based on the notion of ‘empowering your people to power your business’. The team offers a full spectrum of services, from organisation and people development to employment relations, comprehensive HR processes and recruitment. “Our HR team takes the same collaborative approach as our accounting team,” says Julie, who joined Staples Rodway three years ago. “We work alongside our clients to thoroughly understand their business and their individual needs; it’s a partnership. “More and more, companies are accepting the significant role the ‘people’ factor has to play alongside their financial focus,” says Julie. “The two are highly complementary and together boost a company’s overall performance. “We are a one-stop-shop. While other firms have their own particular specialities, we have specialists across the board. In fact, it’s been a deliberate strategy of ours: to build a team with complementary skills so that, together, we can offer our clients a complete range of HR/OD skills.” With over 30 years’ experience in HR and organisational development, and 20 years’ operating her own consultancy, Julie and a team of six specialists in Taranaki have been a formidable force behind the HR arm’s more recent growth. Over the past three years, the HR team and the revenue it generates have both doubled, and the recruitment business has tripled in size. The service offering, too, has expanded significantly and now includes comprehensive leadership development programmes, which are delivering exceptional results. “It’s a real demonstration of the firm’s commitment to the HR business, and we see a tremendous opportunity for even more growth,” says Julie

PEOPLE ARE EVERYTHING IN BUSINESS Julie disagrees with the cliché: people are a business’ greatest asset. “People are not assets,” proposes Julie. “People are your organisation. Without people, you can’t deliver to your customers, you can’t make your product and, crucially, without people you can’t have a culture.”

Organisational culture is the way a company approaches its work, its values, principles and beliefs, and what is communicated to staff. Evidence suggests it can affect the performance of a business by a staggering 20-30 per cent. “Quite simply, a culture and values system that aligns with an employee's personal values will lead to high levels of employee engagement, ergo, better performance and results,” says Julie. The first step is to define that culture. “Part of our job is to challenge our clients’ thinking. And we’re not shy about asking the tough questions about a company’s existing culture,” says Julie. “Our job is to help clients realise the best culture for their company, ensuring that it aligns with their vision and business strategy, and is communicated appropriately to staff.” Leaders make the difference: when leaders across all levels of a business are in tune with the values-driven culture, chances are the business will flourish and productivity will soar. Successful leaders will motivate, enthuse and build respect amongst people. The team understands and builds this into all aspects of services to clients. This is the true power behind any business and each member of the team knows how to switch it on. The right person in the right role is one of the most important decisions a business owner will make, says Julie. And getting it wrong doesn't just cost time and money, it can have far-reaching implications for any business. “When it comes to recruitment, it’s about more than pure competency: personality, attitudes to teamwork, communications skills and emotional intelligence are all important when considering whether someone is the best fit. “That’s why we work hard to really know our clients’ business, from their culture to their company goals; it’s crucial. And it’s an approach that we apply to all aspects of our business: from recruitment to employment services, leadership coaching and people skills to organisational culture shifts,” says Julie. Staples Rodway’s HR services are available to any business, whether they’re an existing client of the firm or not. Clients range from the oil and gas, health, dairy, timber, manufacturing, transport, and farming sectors, amongst others. To find out how Staples Rodway can support your HR needs, visit the dedicated website, or phone Julie Rowlands on 06 757 3155.

The Human Resources team in Hawkes Bay provide a complete range of integrated human resource services throughout the region and across a number of industries and organisations, even if you are not a Staples Rodway client. Heading the team is lead consultant, Andrea Stevenson. Andrea and her team offer the full spectrum of Human Resources and Organisation Development professional services and are proud of the reputation they have built. They come from a range of backgrounds and industries with specialist areas in business psychology and psychometrics, employment relations, generalist HR as well as coaching and development. The team are passionate about Hawkes Bay businesses and provide a full range of bespoke HR services, including assistance with recruitment and selection, leadership development, 360 degree surveys and feedback, remuneration and incentive strategies, and employment relations advice and procedures. Andrea Stevenson can be contacted on 06 878 7004.





Determining the correct employment status of workers has significant implications for both parties in an employment relationship. For example, tax obligations, holiday entitlements, redundancy entitlements and ACC payments differ depending on whether a worker is deemed to be an employee or an independent contractor. This article focusses primarily on the tax issues.


HEN I WAS A YOUNG accountant, one of my new clients told me that he had become sick and tired of all the administration work involved with employees and complying with PAYE. He had therefore made all his employees independent contractors, and they were now looking after their own taxes. Unfortunately, my new client was in the building industry, and although he may have been able to get out of deducting PAYE on salary and wages, there was still a requirement to withhold tax on the payments to the contractors, just under different rules. My client had not done that, and therefore exposed himself to the possibility of significant tax penalties. He had also potentially exposed himself to other risks under his employment law obligations.

pendent contractor who performs duties listed in the PAYE deduction tables. The PAYE table specifies the rate that tax should be withheld at. If an independent contactor has been engaged and performs duties outside those listed, there is no need to register as an employer or deduct tax. Independent contractors must file IR3 income tax returns declaring all their income received and related business expenses.



PAYE deducted from payments to employees

Withholding tax deducted from payments to contractors if services performed are on the PAYE tables on the IR 340 and IR 341 (you can easily get these forms by going to the IRD website, and typing the numbers into the search site. See page 17 of the IR 340 for the correct rates.)

Unable to register for GST for services they supply as employees

Depending on turnover levels, may become liable to register for GST and will therefore be required to meet all requirements of GST legislation

Unable to deduct business expenses

Can deduct business expenses from their income in determining assessable income

Option to file income tax return

Required to file income tax return every year, and may have to pay provisional tax

Employer pays ACC levies on employees’ behalf

Contractor pays ACC employee and earner premium levies for themselves

Eligible for overtime and holiday pay

Issue invoices for work completed

EMPLOYEE VS CONTRACTOR There are unfortunately no black and white rules to determine whether a person is an employee or a contractor, but there are some guiding principles that should be considered to reach a conclusion. These are: Control The degree of control the “employer” exerts over the work performed and the manner in which it is to be done needs to be examined. The greater the influence over working hours and methods the more likely it is that person is an employee. Integration This test looks at whether the person engaged to perform the services is integrated into the business that hired them. A high level of integration indicates an employee relationship. This would normally exist where the work performed is an integral part of the business operation rather than a one-off operation. Independence The level of independence a person exerts over their work also needs to be examined. The more independent the person providing the service the more likely they will not be considered an employee. A high level of independence is likely to indicate an independent contractor relationship. Factors indicating a high level of independence include the ability to work for multiple clients, working from their own premises, supplying their own tools or equipment and the payment of their own taxes and levies. Intention The intention of each party to the agreement needs to be reviewed as to the nature of the relationship. The fact that a written contact states the person is either an employee or an independent contractor is often a starting point in determining the type of relationship. 

TAX ISSUES The tax consequences will follow the determination of whether it is an employee or contractor relationship. The key tax issues are outlined in the table. Employers who have an employment relationship with employees must register as an employer with IRD and deduct PAYE. The employer must also register as an employer and deduct withholding tax if the employer has engaged an

CONCLUSION As an employer it is important to get the distinction between an employee or independent contractor correct as it can have a major impact on the tax compliance obligations of both parties. The penalties imposed if you get it wrong can be substantial. The onus is on the employer to pay tax on the employee or independent contractor’s behalf. The Inland Revenue upon a review or audit which results in a reclassification of a contractor as an employee may treat this “contract” payment as the net amount and gross up the payment to determine the PAYE that should have been paid. The contractor on the other hand may have GST cancelled and expenses claimed reversed. It is crucial to ensure the employee or independent contractor relationship is clearly defined and determined. We strongly recommend that advice is sought in the beginning to avoid exposure to additional liability. NUMBERS Spring 2015 • 23



If you’d suggested to Staples Rodway’s Bruce Richards in the ’80s that he would play an important role in establishing and supporting a world-class arts festival in Taranaki, he would have laughed…


RUCE RICHARDS, FORMALLY A PARTNER of Staples Rodway Taranaki for 35 years, has been an avid outdoorsman all his life; he spends his spare time surfing, playing golf, snowboarding or trekking in the mountains. Back in the ’80s, culture and the arts simply weren’t on his radar. So what changed? The Taranaki Arts Festival Trust (TAFT) was established as a charitable organisation in 1991. The founders, arts consultant Roger King and commercial lawyer Grant Kerr, inspired by the Wellington Arts Festival, decided Taranaki needed something similar. To help the concept succeed, they needed an accountant on the team; enter Bruce Richards, who had been providing accounting services to Kerr for several years. With no knowledge of the arts scene, Bruce accepted the challenge. “Clients began to see me in a new light!” says Bruce. And so the Taranaki Arts Festival was born; it has continued to grow and evolve in the 26 years since. Staples Rodway now provides accounting expertise for the arts festival itself and for four additional TAFT trusts. “We are a small team of 16 permanent staff, we don’t have an accountant on board,” says TAFT Chief Executive Suzanne Porter. “We rely on Staples Rodway to oversee TAFT’s finances. It allows us to focus on our core competency, which is delivering events.” The festival has helped overcome potential geographical, social and economic barriers to enable thousands of people in the Taranaki region to gain access to world-class arts and cultural events. And the impact of the festival on the region is significant, as shown by an Economic Impact Report conducted by economists BERL in 2013. That year a total of 14,273 tickets were sold across 44 acts and 88 performances. The report showed that $3.5 million was spent in Taranaki and 33 full-time jobs were supported for one year in the region.

24 • NUMBER Spring 2015

Suzanne says that the region has a reputation for punching above its weight. “Taranaki does things it’s not expected to do; the strength of the region is that everyone gets behind things.” Events are held in venues ranging from New Plymouth’s Opera House to farming and community halls in Stratford, Inglewood and Hawera. Over the years TAFT’s partnership with Staples Rodway has grown and the accounting firm is now also the festival’s lead sponsor.

Sponsorship is central to the festival’s success and Suzanne says that approximately 45-55 per cent of the festival’s budget comes from sponsorship. “It means we can offer things that we wouldn’t be able to otherwise, and at one-third of the ticket price. Comedy, burlesque, theatre, concerts – many of these acts simply wouldn’t come here without the support of our sponsors.” Today TAFT manages performing arts venue the TSB Showplace and a total of five festivals, including the PowerCo Garden Spectacular and the internationally acclaimed WOMAD NZ Festival. Having built up expertise and financial reserves over time, TAFT has also been able to experiment with events like Tropfest, a seven-minute short film competition and festival, and Kinetica, which fuses kinetic art, design and engineering. Importantly, TAFT has managed to remain viable in a very volatile industry and, in large part, this reflects Bruce’s stewardship and the support of the Staples Rodway team. In fact, TAFT has a multimillion dollar turnover and, to this day, remains the second largest arts festival organisation in New Zealand after the Wellington International Festival of the Arts. Bruce retired from the Taranaki Arts Festival Trust earlier this year. He’s passed the TAFT torch on to Staples Rodway Taranaki Managing Director Chris Lynch, who replaces Bruce as trustee. The TAFT-Staples Rodway partnership is wellplaced to continue for many years to come.


Electric vehicles are becoming more popular around the world but are something of a rarity on New Zealand roads. This is a mystery given our expensive oil imports, plentiful (relatively) cheap electricity and clean green image.


TAPLES RODWAY IS A PROUD supporter of Drive Electric (“DE”), a not-for-profit organisation dedicated to promoting the use of electric vehicles in New Zealand by highlighting the benefits of electric vehicles and lobbying regulators and influencers. DE was founded in 2012 by Soichiro Fukutake, one of Japan’s most influential businessmen who now lives in New Zealand and is passionate about the environment. Since formation, DE has been funded by private donors, organisation members and industry sponsorship. The Board was recently revamped and with Mark Gilbert (ex BMW New Zealand Group Managing Director) as Chairman, DE is invigorated with new energy. New Zealand currently has 743 registered electric vehicles, 142 charging locations and 8 different electric vehicle models including those from Audi, BMW, Mitsubishi, Nissan and Porsche. New Zealand should be an ideal market for electric vehicles, as we currently have the 4th largest renewable energy source in the world at approximately 80% of energy generation (Australia has only approximately 13%). The average New Zealander drives 35km per day, and an electric vehicle can travel approximately 120km before re-charging. While we have plenty of open roads and long distances between potential charging up points, the vast majority of journeys are shorter city commuting trips, so “range anxiety” should not be an issue. New Zealand’s electricity sector is strongly supporting the move to increase electric vehicles by installing charging infrastructure and increasing their own EV fleets. There are plans to have a nationwide charging network for New Zealanders from Kaitaia to Bluff. Mark Gilbert comments about the likely future of electric vehicles: “Younger people are going to drive a lot of this

Michael Hill with his BMW i8 electric hybrid

change. Why would people want to keep putting money into depreciating assets, which is what vehicles are. You can mitigate some of this by buying an electric vehicle. Electricity is the equivalent of about 30 cents per litre, probably less. Savings will be made in household budgets and there are health benefits from cleaner air.” On 30 April 2015, DE hosted a Plug-In Fleet Day at Auckland’s ASB Showgrounds. The event was geared towards promoting electric vehicles to fleets buyers because they purchase 60 to 80 per cent of new cars sold in New Zealand each year. There was a panel discussion and the opportunity to test drive electric vehicles. Guest speakers were Fraser Whineray, CEO of Mighty River Power, and Hon. Simon Bridges, Minister of Energy and Resources. Norway currently leads the world in electric vehicle take up. As of March 2015, Norway had a total of 52,865 registered plug-in electric vehicles, with a population of just 5 million people. Norway’s goal for 2015 is for 20% of cars on their roads to be electric vehicles. Given Norway’s significant oil production from the North Sea, this is an impressive commitment to an alternative energy source. In the United States The “West Coast Electric Highway” from Canada to Mexico is being planned. In other jurisdictions where electric vehicles operate there have been various government incentives such as purchase grants and favourable tax regimes. New Zealand provides an exemption from Road User Charges for electric vehicles, but no other incentives. As with a lot of wide-spread change and the acceptance of new technology, consumers will make the move when new technology becomes cheaper, performs well and is easier to access. It is possible that the significant investments made by US company Tesla will create that tipping point. Tesla first made headlines when it produced the first fully electric sports car in 2010. Some models of its electric cars can accelerate from zero to 60 miles per hour in three seconds and have a range of over 350 kilometres. Tesla, led by CEO Elon Musk, have committed as much to delivering practical renewable energy, and practical electric vehicles on a mass scale to consumers as they have to building a business. On 12 June 2014, Tesla hit front page news with Musk announcing that “all our patents belong to you”. Tesla released all the patents on its intellectual property in a bid to encourage the development of electric vehicles. Musk also stated “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.” Notable drivers of electric vehicles include Queen Elizabeth II, who recently traded her custom Bentley for a Nissan Leaf. Michael Hill is the proud owner of a new BMW i8, and rumour has it that Sir Peter Jackson is considering a Tesla S EV. Staples Rodway is a corporate member of DE and Staples Rodway Auckland Director, Annette Azuma, is a Board Member. To read more about Drive Electric, visit

NUMBERS Spring 2015 • 25

AUCKLAND Level 9, 45 Queen St PO Box 3899 Auckland 1140 Phone 64 9 309 0463 Fax 64 9 309 4544

WAIKATO 4th Floor, BNZ Building 354 Victoria Street PO Box 9159 Hamilton 3240 Phone 64 7 834 6800 Fax 64 7 838 2881

TAURANGA Level 1, 247 Cameron Road PO Box 743 Tauranga 3140 Phone 64 7 578 2989 Fax 64 7 577 6030

HAWKES BAY Cnr. Hastings and Eastbourne Streets PO Box 46 Hastings 4156 Phone 64 6 878 7004 Fax 64 6 876 0078

NEW PLYMOUTH 109-113 Powderham Street PO Box 146 New Plymouth 4340 Phone 64 6 757 3155 Fax 64 6 757 5081

STRATFORD 78 Miranda Street PO Box 82 Stratford 4352 Phone 64 6 765 6949 Fax 64 6 765 8342

WELLINGTON Level 6, 95 Customhouse Quay PO Box 1208 Wellington 6140 Phone 64 4 472 7919 Fax 64 4 473 4720


26 • NUMBER Spring 2015

Level 2, Tavendale Centre 329 Durham Street North PO Box 8039 Christchurch 8440 Phone 64 3 343 0599 Fax 64 3 348 0186

Staples Rodway NUMBERS Spring 2015  

THE INVESTMENT ISSUE Investment Life Stages | Residential Property Investment | Deflation: Is it really the Bogeyman? | Equity Crowdfunding

Staples Rodway NUMBERS Spring 2015  

THE INVESTMENT ISSUE Investment Life Stages | Residential Property Investment | Deflation: Is it really the Bogeyman? | Equity Crowdfunding