Newsletter

DECEMBER 2008

Going into the festive season with a positive attitude may be a challenge for some this year. But those with a positive mental attitude seem to be highly energised by the turbulent economic environment. They are proactively and decisively making things happen and taking opportunities. Revising strategy, making plans, overcoming challenges and getting results are the life blood of business. One single positive decision by a business leader often has a positive flow on effect to many other people.

“The world is full of cactus, but we don’t have to sit on it”. Will Foley

Merry Christmas and a cactus free New Year.

Grant Brownlee,
Managing Director.

Introducing Triplejump and Mortgage Link

UHY Haines Norton have recently entered into a joint venture with Stuart and Erica Wills to operate Triplejump and Mortgage Link. This further expands the range of services we offer to clients to include insurance and mortgage broking services. These services are normally both free of charge.

Triplejump is New Zealand’s first independently owned franchise network of wealth protection advisers who specialise in human capital risk for small to medium business enterprises. We know how unpredictable life can be and we have learnt that sometimes, what we do not know is more significant to the future of a business or lives than what we do know today. We know it is natural to be optimistic and positive about the future but sometimes defining events happen that change the future.

In our experience, most business owners are so busy responding to the opportunities they see that they often overlook potentially the greatest threat to their business: the risk that they, or someone they rely heavily on, may suffer a serious illness, disability or die prematurely.

At Triplejump, we help business owners develop and implement plans to protect their wealth, livelihood and aspirations from human capital risk.

So why are we different?

Today there are sixteen Triplejump offices across New Zealand in most of the main cities and towns.

A key strength of belonging to the franchise is that it provides us with the most advanced systems and processes in the market giving you the confidence that you are receiving the best and most appropriate advice and solutions possible. Being part of Triplejump also means that we are required to undertake intensive training and to maintain our knowledge and skills through ongoing education.

We believe in empowering you to understand your wealth protection needs by involving you in a consulting process with us and then by assisting you to understand the solutions that are relevant to your needs. We focus on helping you to think holistically about the outcomes you want to achieve and the inter-relationship of all the components of risk planning that will ensure that should an unexpected event occur, your objectives are able to be met.

We do not assume that insurance is the solution. There are many ways to manage risk and one of the purpose’s of our consultation process is to explore how you can solve your problems through your own resources. We only recommend that you insure financial risk when it is shown that you cannot manage it yourself.

Triplejump is also completely unaligned to any insurance provider, we do not have quota arrangements and we do not accept any soft dollar incentives from insurance companies. You may find it interesting to know that we have turned down many cruises, holiday trips and sporting event tickets over the last year because these do not align with our values and ethics about avoiding potential conflicts of interest.

You can be sure you are receiving professional advice around the protection of your wealth, second to none in the marketplace.

Our futures together

We look forward to meeting with you to learn more about the defining moments in your businesses and families lives. We know that your business is important to you for your current and future wealth so come and see us for a free, no-obligation consultation. We will help you think about how your business would manage unplanned eventualities so that no matter what happens you can make the best of it.

Although mortgages absorb the biggest chunk of most people’s incomes for much of their working lives, many don’t do their home-work before signing the paperwork. At Mortgage Link, we build an ongoing relationship with our clients so that we understand your goals during the period you have the debt – and beyond.

Nowhere in that relationship is the focus placed solely on gaining the home loan with the cheapest rate – if that is your only criterion for choosing a loan you may find yourself with a competitive interest rate but not so competitive structure or a loan that does not suit your immediate and ongoing needs.

We offer an advice based service. Our relationship with clients is a long-term one that looks at the big picture – not just current circumstances, but what you see over the next three to five years, then ten to fifteen years.

A range of factors influence the advice relationship, and the lenders and its loan is part of that. Within that area, there are several complexities, including interest rates, repayment options, security requirements and penalty implications.

Our goal is to build a trusted relationship with our clients, so we can satisfy both their short and long-term goals. A sound advice package from an expert – that’s the formula Mortgage Link delivers.

You can contact Stuart or Erica on 09 839 2189 or talk to your UHY Haines Norton Partner or Manager.

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Ostendo Accounting

Our Business Improvement Department has an ideal software tool to assist businesses in these challenging economic times. Ostendo Accounting Software is able to integrate with your existing MYOB or QuickBooks Accounting Software and give you the additional information and efficiency needed to keep your business on track.

The UHY Haines Norton Business Improvement Department has over 20 years experience in successfully installing accounting software and using it to improve business. We consider Ostendo to be the best accounting operations software available for the small to medium business market.

The software is available at a competitive price compared to other products in the New Zealand market. We have already carried out successful implementations with UHY Haines Norton clients.

Listed below are some of the features and benefits the software can provide to businesses:

Are you experiencing…

These potential problems could suggest the lack of…

Such frustrations stagnate business, open up more competition and put at risk the efforts of everyone involved. Better operational systems free up staff to focus on higher return activities, profitable work and the real business goals.

For more information please contact Michael Jamieson on 09 839 0246 or his assistant Bhavna Manilal on 09 839 0240.

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Reckless Trading – Passive Directors
will be liable

(An article from Meltzer Mason Heath)

A recent judgement has highlighted the care and caution a company director must exercise. A creditor has taken action against two company directors for reckless trading and failing to keep proper books of account.

The directors were founding shareholders/directors of a business set up in 1999 to act as a print broking arm for a major client. This arrangement failed within two months. At the time the company had no other customers, however it did recover somewhat and traded for a further two years – but was never profitable.

The directors took little or no active part in the management of the business. It was managed in all respects by the executive director and manager (who turned out to be a slick fraudster and was subsequently convicted of fraud). By the time the company was placed into liquidation its debts were in excess of $2 million.

Throughout the life of the company no books of account were kept that satisfied the requirements of the Companies Act. The directors could not at any time ascertain the financial position of the company accurately.

There were several indicators of insolvency throughout the two year trading period of which the directors failed to take notice or act upon. It was only when the frauds became known to them that they took control of the company and had it placed into liquidation shortly thereafter.

The judgement stated: “This case is a timely reminder of the fundamental principle of the Companies Act 1993 that company directors must take proper steps to place themselves in a position to guide and monitor the management of the company. The responsibility for governance of the company is theirs. They cannot simply treat the appointment as a sinecure and then leave to management, or other advisers, the duties of running the company and ensuring compliance with legal obligations. Let delinquent directors beware…”

The directors were found to have traded recklessly and failed to maintain proper accounts. They were liable to contribute $1.26 million to the liquidation.

What does this mean for you?

The days of the ‘passive’ director are over. We often see a husband/wife/partner as a director when it is obvious they have no understanding of the responsibilities attached to the role. A director must take an active part in the direction of companies and act reasonably and prudently.

We suggest you review your directorships and consider retaining only those where you take an active part in the business and refresh yourselves with the duties of a director as per the Companies Act 1993.

Directors must ensure that adequate books of account are kept.

Again this is as per the Companies Act 1993 and directors can find themselves personally liable and without limitation of liability for failing to comply with this section of the Act as is the case with this judgement against these directors.

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Portfolio Investment Entities (PIEs)

Difficulties in calculating tax on investment income can be eliminated when investors use a PIE to manage their funds. The PIE manager calculates the income including Foreign Investment Fund (FIF) income and adjusts holdings for tax.

If the investor elects the correct ‘Prescribed Investor Rate’ (PIR), the PIE income is excluded from the individual’s tax return. The PIR for individuals is either 19.5% or 30%. This feature can be either a benefit to the investor or a trap for the unwary.

If the individual’s income (excluding PIE income) is less than or equal to $38,000 and their PIE income does not exceed $22,000, a 19.5% PIR can be elected. This PIE income is excluded from the tax return provided these conditions are met. If actual income levels extend beyond these limits, the PIE income must be included.

When a taxpayer elects a 30% PIR, this becomes a final tax for that years PIE income, i.e. if their actual marginal rate of tax is only 19.5%, the taxpayer will be over taxed on their PIE income and it can’t be refunded.

Clients should monitor their anticipated PIE, other and main income for the year and advise their PIE manager if they think a change in PIR is required. We can be of assistance to you including advising on whether you should adjust your PIR. Getting your PIR right can save tax and also reduce tax calculation time.

For trusts investing in PIEs, these can elect either a 0% or a 30% PIR. A 0% PIR means the trust must include the PIE income in its tax return and a 30% PIR election means the income is excluded from the return.

Difficulties arise when the trust doesn’t file an election but a 30% default is used by the PIE manager. In these circumstances it does not mean the trust can exclude the PIE income. The absence of an election for a trust means the PIE income is taxable and the 30% tax paid is available as a tax credit.

The risk is PIE income is incorrectly excluded from the return when it should be subject to tax at 33% as trustee income. Potentially the trustees will have a 3% shortfall and this will be subject to penalties and interest.

Clients should ensure appropriate elections are being made and also let us know about these elections. If no election has been filed it can mean more time will be taken up in preparing the return, especially when it was intended that it be excluded income.

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