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May 2020 Rural Edition

End of Financial Year: We enclose your annual year end green questionnaire form. Even if you think there is nothing to fill out, please sign it on the front page and send it in.

 

Livestock Numbers: Here are a few tips to help you accurately record your livestock numbers.

·         It is a lot easier if it's done on or near to balance date. (i.e. 31 May 2020!)

·         Don't include heifers coming into the herd in the cow numbers, these are R2 heifers.

·         Don't forget to include carry over cows and stock out grazing or leased out that you own.

·         Calves born after last year's balance date and before this year's balance date are categorised as Rising 1. So autumn born calves are R1 calves at 31 May.

 

Budgets: Now is a great time to put together a budget for the 2020/21 season. The bankers generally shy away from doing your budget so please let us know if you would like us to help you with this, we have all your financial information and history.

Once the budget is sorted, we can prepare reports that compare actual vs. budget figures. This helps you track how you are performing compared to budget, or even just compared to last year. If you'd like to make use of this feature, please let us know and we can send you a report each GST period.


Wages & Payroll: We have a dedicated team working specifically on employment and payment of staff. If you are wanting help with employment agreements, wages calculations for new or existing employees, or final pay calculations then please contact us. We also have access to a specialist Human Resources company that we refer clients to for those tricky employment issues, if you have a problem in this area then please call and we can assist with a referral.

 

The Minimum Wage is now $18.90 per hour. You may need to check what hours your staff are working to ensure they're at least being paid at or above the minimum hourly rate, particularly over the calving period.

 

Payday filing is now compulsory.  If you aren't already doing it or you're finding it a real bind, speak to us, we can do this for you.

 

There are a few "golden rules" for employing staff:

·         You should not pay anyone without an IRD number. New employees must sign an IR330 tax code declaration.

·         All employees must have an employment agreement, including casual employees. We can supply you with Federated Farmers Contracts at members' rates ($95 incl).

·         Everyone is entitled to 8% holiday pay or Annual leave. This must be agreed to in the employment agreement.

·         Each pay period must meet the minimum pay rate requirement with respect to hours worked.  We recommend you pay staff fortnightly to better allow for this.

·         If you provide any taxable allowance (e.g. free house) then its value must be included in your wage/PAYE tax calculation. Market value of rents should apply.

·         Kiwisaver is compulsory for all NZ staff aged 18-65 when beginning a new job. An opt-out form needs to be completed if the staff member does not want to join Kiwisaver.

 

Interest Rates: We are seeing many farmers experiencing some incredibly low interest rates at the moment but see quite a range across our clients. We encourage you to talk to you banker about your interest rate if you haven't done so already. If you want some certainty then ask the banker for details of fixed interest rates, you might be surprised at how close the 1,2,3,4,5 year rates are. That being said those clients who have elected to float or work on rolling 1 to 3 month rates have had the advantage of falling rates for quite some time. With the current state of the economy it doesn't look likely that rates will bounce back any time soon. As a last note, banks now require that principal repayments are included in all budget calculations, interest only loans appear to be a thing of the past.

 

 

Rental losses law change: As of 1 April 2019, residential property owners are no longer able to offset their losses against their other income. This will be the first year that we cannot claim those rental losses in your tax returns, these losses will be "ring-fenced' which means they will accumulate and carry forward and can only be used against future rental profits.

 

Inland Revenue & My IR: Inland Revenue have recently overhauled their website. If you are a user of My IR you will have noticed the changes. If your receive any correspondence from the IRD telling you that you have overdue tax owing or tax refunds due, please check with us first before paying it or giving them your bank account details.

 

Tax Payments: Remember that the IRD no longer accepts cheques for tax payments. When you pay your taxes electronically, please be sure to load the correct IRD number, period and tax type code for which that payment applies.  Give us a call if you're unsure.

You can also make tax payments by eftpos (or cash) at Westpac branches.

 

When paying PAYE, there is a new tax code, its EMP, please do not use DED anymore. We will remind you of this when we send out your PAYE payment notices each month.

 

Asset Purchases: Assets purchased for under $5,000 between the 17 March 2020 and 16 March 2021 can be claimed as a tax deductible expense in the year they're bought. This used to only apply to assets costing less than $500. The level will reduce to $1,000 on 17 March 2021. Assets costing more than these levels can still be depreciated at IRD set percentages.

 

Kiwisaver: Make sure you have contributed at least $1,043 to your Kiwisaver fund by 30 June as you will then receive the $521 Tax Credit. That's Free Money! It's a good time to check how your fund is performing too. While you're at it, please check you're on the correct PIR tax rate. Talk to us if you're unsure.

 

Emailing of Client Documents:  We are increasing the use of email as a way of distributing important information to our clients, it's now more reliable than the traditional posty delivered mail. We have already begun emailing reminder letters and payment notifications for GST & PAYE. We will shortly begin emailing Income Tax notifications as well as our fee invoices to you. If you would prefer to receive these documents by post, please let us know.

 

Farmer Outlook                                                                        

At this stage, farmers have been reasonably insulated from Covid 19. The real impact of this is yet to be seen and no one is going to be immune.  A few points to consider:

-      Fonterra have predicted their deferred payments for July to October 2020 at $1.41, this is well above their prediction of $1 for the 2020/21 season. This will help hold up income through the coming milking season even though next years projected payout is significantly down.

-      Depending on the weather, production and costs, farmers 2020/21 taxable incomes will be consistent with 2019/20. However the 2021/22 year may show a significant drop based on the current payout estimates.

-      Covid 19 is going to have an impact on the labour market. Particularly those employers relying on overseas labour, conversely there may be more New Zealanders looking for farming jobs.

-      Commodity prices – it will be interesting to see what happens to commodity prices as a result of changes to unemployment figures and some of our population's disposable incomes.

-      It's a time to strengthen your balance sheet – it'll make it easier to weather a down turn and it'll put you in a better position to make that next move when the times right.

-      Don't revert back to a she'll be right attitude with regards to expenditure, don't lose the lesson or some of the efficiencies you have now gained.

-      Consider preparing a budget. It is important that you have a robust financial plan rather than relying purely on luck and/or good fortune, it helps you clarify the decisions you need to make, it will provide you with some clarity and direction on where you are going, it may well reduce stress levels.    

-      Talk to your banker and us early if you haven't already done so.

-      Work on that relationship with your banker, you need them and they need you, be proactive around your requirements, start with a budget and don't be afraid to discuss interest rates, remember that nobody likes surprises so discuss issues early.

-      Remain optimistic and maintain a long term view.

May 2020 Year End Update

End of Financial Year: We enclose your annual year end green questionnaire form. Even if you think there is nothing to fill out, please sign it on the front page and send it in.

 

Livestock Numbers: Here are a few tips to help you accurately record your livestock numbers.

·         It is a lot easier if it's done on or near to balance date.

·         Don't include heifers coming into the herd in the cow numbers, these are R2 heifers.

·         Don't forget to include carry over cows and stock out grazing or leased out that you own.

·         Calves born after last year's balance date and before this year's balance date are categorised as Rising 1. So autumn born calves are R1 calves at 31 May.

 

Budgets: Now is a great time to put together a budget for the 2020/21 season. The bankers generally shy away from doing your budget so please let us know if you would like us to help you with this, we have all your financial information and history.

Once the budget is sorted, we can prepare reports that compare actual vs. budget figures. This helps you track how you are performing compared to budget, or even just compared to last year. If you'd like to make use of this feature, please let us know and we can send you a report each GST period.

 

IRD Livestock Values: The IRD have recently released their Herd Scheme values for 2020.

Dairy

 

2020

 

2019

 

2018

 

 

R1 heifers

 

685

 

685

 

691

 

 

R2 heifers

 

1,274

 

1,274

 

1,313

 

 

MA cows

 

1,513

 

1,513

 

1,529

 

 

R1 steers & bulls

 

497

 

497

 

581

 

 

R2 steers & bulls

 

901

 

901

 

936

 

 

Breeding Bulls

 

1,789

 

1,789

 

1,947

 

 

 

 

 

 

 

 

 

 

 

Wages & Payroll: We have a dedicated team working specifically on employment and payment of staff. If you are wanting help with employment agreements, wages calculations for new or existing employees, final pay calculations then please contact us. We also have access to a specialist Human Resources company that we refer clients to for those tricky employment issues, if you have a problem in this area then please call and we can assist with a referral.

 

The Minimum Wage is now $18.90 per hour. You may need to check what hours staff are working particularly over calving to ensure they're at least being paid at or above the minimum hourly rate.

 

Payday filing is now compulsory.  If you aren't already doing it or you're finding it a real bind, speak to us, we can do this for you.

 

There are a few "golden rules" for employing staff:

·         You should not pay anyone without an IRD number. New employees must sign an IR330 tax code declaration.

·         All employees must have an employment agreement, including casual employees. We can supply you with Federated Farmers Contracts at members' rates ($95 incl).

·         Everyone is entitled to 8% holiday pay or Annual leave. This must be agreed to in the employment agreement.

·         Each pay period must meet the minimum pay rate requirement with respect to hours worked.  We recommend you pay staff fortnightly to better allow for this.

·         If you provide any taxable allowance (e.g. free house) then its value must be included in your wage/PAYE tax calculation. Market value of rents should apply.

·         Kiwisaver is compulsory for all NZ staff aged 18-65 when beginning a new job. An opt-out form needs to be completed if the staff member does not want to join Kiwisaver.

 

Interest Rates: We are seeing many farmers experiencing some incredibly low interest rates at the moment but see quite a range across our clients. We encourage you to talk to you banker about your interest rate if you haven't done so already. If you want some certainty then ask the banker for details of fixed interest rates, you might be surprised at how close the 1,2,3,4,5 year rates are. That being said those clients who have elected to float or work on rolling 1 to 3 month rates have had the advantage of falling rates for quite some time. With the current state of the economy it doesn't look likely that rates will bounce back any time soon. As a last note, banks now require that principal repayments are included in all budget calculations, interest only loans appear to be a thing of the past.

 

 

Rental losses law change: As of 1 April 2019, residential property owners are no longer able to offset their losses against their other income. This will be the first year that we cannot claim those rental losses in your tax returns, thos losses will be "ring-fenced' which means they will accumulate and carry forward and can only be used against future rental profits.

 

Inland Revenue & My IR: Inland Revenue have recently overhauled their website. If you are a user of My IR you will have noticed the changes. If the website shows that you have overdue taxes, please check with us.

 

Tax Payments: Remember that the IRD no longer accepts cheques for tax payments. When you pay your taxes electronically, please be sure to load the correct IRD number, period and tax type code for which that payment applies.  Give us a call if you're unsure.

You can also make tax payments by eftpos (or cash) at Westpac branches.

 

When paying PAYE, there is a new tax code, it's EMP, please do not use DED any more. We will remind you of this when we send out your PAYE payment notices each month.

 

Asset Purchases: Assets purchased for under $5,000 between 17 March 2020 and 16 March 2021 can be claimed as a tax deductible expense in the year they're bought. This used to only apply to assets costing less than $500. The level will reduce to $1,000 on 17 March 2021. Assets costing more than these levels can still be depreciated at IRD set percentages.

 

Kiwisaver: Make sure you have contributed at least $1,043 to your Kiwisaver fund by 30 June as you will then receive the $521 Tax Credit. That's Free Money! It's a good time to check how your fund is performing too. While you're at it, please check you're on the correct PIR tax rate. Talk to us if you're unsure.

 

Emailing of Client Documents:  We are increasing the use of email as a way of distributing important information to our clients, it's now more reliable than the traditional posty delivered mail.. We have already begun emailing reminder letters and payment notifications for GST & PAYE. We will shortly begin emailing Income Tax notifications as well as our fee invoices to you. If you would prefer to receive these documents by post, please let us know.

 

MPI 2020 Drought Recovery Advice Fund:  MPI have recently announced the 2020 Drought Recovery Advice Fund is to help farmers recover from the 2020 drought, and plan for future droughts. It will pay for professional advice to a maximum of $5,000 (excluding GST).

To be eligible for this fund:

1)    the farm must be in a 2020 drought-affected region or district

2)    the farming business must have been negatively affected by the 2020 drought

3)    at least 50% of the farmer's income, in a normal year, must be earned from the farming business

 

If you think that you might benefit from this, please give us a call or check out the MPI website. https://www.mpi.govt.nz/protection-and-response/responding/adverse-events/support-during-a-drought/2020-drought-recovery-advice-fund/

 

Candy Gillespie is currently applying to be a preapproved supplier and can help you with:

ü  strategic planning, including farm business and whole farm plans

ü  business continuity

ü  modelling farm systems change scenarios

ü  alternate land-use options

ü  financial planning and decision support

ü  farm accounts analysis

 

Farmer Outlook                                                                     

At this stage, farmers have been reasonably insulated from Covid 19. The real impact of this is yet to be seen and no one is going to be immune.  A few points to consider:

-      Fonterra have predicted their deferred payments for July to October 2020 at $1.41, this  is well above their prediction of $1 for the 2020/21 season. This will help hold up income through the coming milking season even though next years projected payout is significantly down.

-      Depending on the weather, production and cost, farmers 2020/21 taxable incomes will be consistent with 2019/20. However 2021/22 year may show a significant drop,

-      Covid 19 is going to have an impact on the labour market. Particularly those employers relying on overseas labour, conversely there may be more New Zealanders looking for farming jobs.

-      Commodity prices – it will be interesting to see what happens to commodity prices as a result of changes to unemployment figures and some of our population's disposable incomes.

-      It's a time to strengthen your balance sheet – it'll make it easier to weather a down turn and it'll put you in a better position to make that next move when the times right.

-      Don't revert back to a she'll be right attitude with regards to expenditure, don't lose the lesson or some of the efficiencies you have now gained.

-      Talk to your banker and us early if you haven't already done so.

-      Work on that relationship with your banker, you need them and they need you, be proactive around your requirements, start with a budget and don't be afraid to discuss interest rates, remember that nobody likes surprises so discuss issues early.

-      Remain optimistic and maintain a long term view.

May 2020 Covid Update

Candy Gillespie staff have been working from home during Covid Lockdown. We will re-open under government recommendations when Covid Alert Level 2 begins.

 

Corona Virus Government Package: This is a quick rundown of the support the government is offering to help businesses impacted by Covid 19.

 

Wage Subsidy Scheme: Thousands of businesses in New Zealand have applied for the Covid Wage Subsidy and billions of dollars have been paid out. To be eligible, one of the main criteria was that Covid 19 had caused business turnover to drop by 30% or more compared to the same time last year. Some businesses who have applied are now discovering that their turnover did not drop as much as expected and are having to pay the subsidy back. Some employers did not continue to pay their staff for the full 12 weeks and are also liable to pay the subsidy back. If you are one of these businesses, talk to us, but be prepared to pay back any subsidy you weren't entitled to.

 

Small Business Cashflow Scheme (SBCS): This is a loan offered to small businesses.

• To be eligible for the SCBS loan a business or organisation must have 50 or fewer full-time employees and be eligible for the Wage Subsidy Scheme. The business must have a sound plan to be viable and ongoing and hold information on file to verify this.

• In most cases, businesses will be entitled to a one-off loan amount of $10,000 plus $1,800 per full-time-equivalent employee.

• Applications will be open from 12 May 2020 to 12 June 2020. Most businesses will receive the funds within five working days.

• Inland Revenue will administer the payments and repayments of this loan.

• The loan has a five-year term and must be repaid in full by 31 July 2025.

• The annual interest rate will be 3% beginning from the date of the loan being provided. Interest will not be charged if the loan is fully paid back within one year (i.e. it's only interest free for the first year if it is repaid in full within 12 months). Repayments are not compulsory in the first 24 months.

 

This will be a good option for many businesses. It could be better than going further into overdraft or applying to the bank for more funding.

Applications need to be made using the MyIR website. You will need to make a declaration about your business and how you'll be using the funds. You only have until 12 June.

 

Loss Carry Back: This scheme allows you to move any losses made in the 2019/20 year or the 2020/21 year to the previous year. Prior to this rule change, these losses could only be carried forward to future years. If in either the 2019/20 year or the 2020/21 year you are likely to make a tax loss, these rules may create some benefit for you.  You may be able to have tax refunded for the prior year. If this sounds like something you want to look into further, please contact us.

 

Deferral of tax: If you have tax due and you aren't able to pay it because of the financial impact of Covid 19 please contact us to discuss your options. IRD is allowing deferral of tax payments with no interest or penalties if you are in this circumstance.  Financial arrangements and Tax payments need to be made 'as soon as practicable'.

 

Asset Purchases: Assets purchased for under $5,000 between 17 March 2020 and 16 March 2021 can be claimed as an expense immediately rather than depreciating the cost over the life of the asset. After next year, this limit will reduce to $1000.

 

ACC: ACC has delayed sending out invoices for Cover Plus Extra (CPX) until July. If you use CPX, you will remain covered at your agreed amount until this time.

 

Review your costs: Now is also a good time to review your costs and ensure your costs are all necessary. Are there any that can be cut back? Talk to your creditors and your debtors to arrange a payment plan for any outstanding bills. We can help with cashflow forecasts.

 

Tax Payments: Remember that the IRD no longer accepts cheques for tax payments. When you pay your taxes electronically, please be sure to load the correct IRD number, period and tax type code for which that payment applies.  Give us a call if you're unsure.

You can also make tax payments by eftpos (or cash) at Westpac branches.

 

There is a new tax code when paying PAYE to the IRD. Previously you had used the DED tax code. The correct tax code is now EMP. We will remind you of this when we send out your PAYE payment notices each month.
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