Welcome again to the McLean and Co. Newsletter in which we discuss current taxation and business matters. We trust you find it informative.  Any feedback would be welcomed.

McLean and Co. has installed Norton Antivirus software to minimise risk of virus transmission in the provision of this service.

McLean and Co. is a home based chartered accountancy practice based in Clive, Hawkes Bay.    Readers are invited to peruse the practice website www.mcleanandco.co.nz,  which lists services provided, gives contact details and indicates how to become a client, contains an extensive base of articles on business and taxation matters,  and has links to other websites that may assist your business.    Being a small firm itself,   McLean and Co. strives to provide a personal and professional service largely to a self employed person and small business client base.  Enquiries are welcomed.

INDEX

1. Relevant Business and Taxation Articles

2. New Additions to our Website

3. Sunglasses, Sunhats, Sunblock

4. 7 March 2003- Provisional Tax Reminder

5. Higher Income Thresholds for Student Loans

6. 24 Low Cost Ways to promote your new or existing Business

7. If you are an Investor- Are you in Business?    

RELEVANT BUSINESS AND TAXATION ARTICLES

The McLean and Co. website contains an extensive number of articles prepared by McLean and Co. relating to taxation and business matters.    Here are a selection that will be of interest:

• Residential Rental Property Taxation            www.mcleanandco.co.nz/RentalProperty.htm

• Depreciation of Fixed Assets                          www.mcleanandco.co.nz/Page72.htm

• Venture Capital                                               www.mcleanandco.co.nz/Page65.htm

• Family Trusts                                                  www.mcleanandco.co.nz/Page19.htm

NEW ADDITIONS TO OUR WEBSITE

We have recently added the following to our website:

• Hawkes Bay Commerce and Attraction Links  www.mcleanandco.co.nz/Links.htm

• Company Incorporation           www.mcleanandco.co.nz/CompanyIncorporation.htm

• Eight Steps to Starting a Business                 www.mcleanandco.co.nz/Page76.htm

   

  SUNGLASSES, SUNHATS, SUNBLOCK

  As a general rule, the Courts have taken the view that clothing and personal items are of a private or domestic nature and therefore not deductible. But when expenditure is incurred in the purchase of clothing which replaces  or is used to protect or maintain normal apparel, a deduction can be claimed, subject to the usual conditions of tax deductability (i.e. necessarily incurred in the operation of a business for the purpose of deriving income).

  It is therefore difficult to prove valid deductibility for sunhats.  They are normally worn by normal people as part of their normal summertime or outdoor apparel.  Building hardhats  used on a construction site would of course be deductible, as they are normal working attire   (N.B. you see people at the beach wearing sunhats , but you dont see too many hardhats)

  Similarly it  may be difficult to prove valid deductibility for sunglasses.  They are also normally worn by normal people as part of their normal summertime or normal apparel .  Welding goggles would of course be fully deductible (N.B.  you see people at the beach wearing sunglasses, but you dont see too many wearing welding goggles)

  Sunblock  is a normal item of expenditure incrurred by normal people in their normal sporting or leisure  lives, so as per the court ruling would not be deductible.   But when it is supplied by an employer to employees , such as a gang of forestry or horticultural workers in an sunny environment to avoid sunburn and assist in health of the employees it is certainly a tax deductible item, as it a cost which is necessarily incurred in the operation of the taxpayers's business and it cannot be categorised as of a private or domestic nature because it is not used privately or personally by the employer.

   

   

  7 MARCH 2003- PROVISIONAL TAX DUE DATE REMINDER

  If you have a standard balance date of 31 March, you are reminded that 7 March 2003 is:

  • the due date for payment of 2003 provisional tax, and

  • the last opportunity to estimate (or re-estimate) your provisional tax for 2003.

   

  HIGHER INCOME THRESHOLDS FOR STUDENT LOANS

  Income thresholds for student loan repayments and full interest write-offs will rise fron April 2003:

  • the income level at which borrowers must start to repay their student loans will rise from $15,496 to $15,964, and

  • the income level under which part-time or part-year borrowers may have interest on their loans fully written off goes up from $25,378 to $25,909.

   

   

  24 LOW COST WAYS TO PROMOTE YOUR NEW OR EXISTING BUSINESS

  Here are 24 proven methods to market your business at low cost:

  • If you dont have a business card and business stationery, have them made up immediately-    your business card, letterhead and envelope tell prospective customers you are a professional who takes your business seriously.

  • Get your business card into a many hands as possible.

  • Talk to all the vendors from whom you buy products or services- give them your business card, and ask them if they can use your products or services, or if they know anyone who can.

  • Attend meetings of professional groups and groups such as Chamber of Commerce, Rotary Club and civic organisations- give your  business cards to people you talk to and ask them what they do and show an interest in them.

  • Become involved in some of these groups- that will give you more opportunity to meet possible prospects.

  • Look for something unusual about what you do, and publicize it-   send out press releases to local newspapers, radio stations or magazines whose audiences are likely to be interested in buying what you sell

  • Write an article that demonstrates your expertise in your field-  send it to newspapers, magazines etc- be sure that your name, business name, reference to your product or service and phone number are included at the end of the article.

  • Whenever you do get publicity, get permission from the publisher to reprint the article containing the publicity-  make photocopies and mail the copies out with sales letters or any other literature you use to market your product or service.

  • Contact non profit organisations, schools and othef businesses who have customers who may need your services- ask for work or leads.

  • Network with others who are doing the same type of work you are- let them know you are available to handle their work overloads.

  • Offer to be a speaker on subjects utilising your area of expertise-   you'll benefit two ways from such engagements, the fee you may receive for doing them, and the publicity you, your product or service gets as a result.

  • If your product or service is appropriate, give demonstrations of it to whatever groups or individuals might be interested.

  • Find out what government programmes are in existence to help you get started in business.

  • Send out sales letters to everyone you think might be able to use what you sell- drop a business card in every letter you send out.

  • If you use a car or truck in your business have your business name and contact information professionally painted on the side of the vehicle- that way your means of transportation immediately becomes a vehicle for advertising your business.

  • Get on the telephone and make cold calls to people who you would like to do business with- briefly describe what you do and ask for an appointment to talk to them about ways you can help them meet a need or solve a problem.

  • Get samples of your product or your work into as many hands as possible.

  • Offer a free, no obligation consultation to people you think could use your services.

  • Learn to ask existing customers, prospects and casual acquaintances for referrals- when you get them , follow up on the leads.

  • Use other people to sell your product or service-  instead of (or in addition to) selling your products yourself, look for existing mail order companies that would be willing to include your products in their catalogues, or distributors or sales agents-  be sure your pricing structure allows for the fees or commissions you will have to pay on any sales that are made.

  • Have sales letters, flyers and other pertinent information printed and ready to go-   ask prospects who seem reluctant to buy from you "Would you like me to send information to you?" and follow this up.

  • Run a contest- make the prize desirable and related to your business

  • Take advantage of any opportunities you have to get free advertisements, or to have your company and its product or sevice listed free in a directory.

  • If your target market would be likely to use the internet , consider putting up a web page-  if you do make it online, be sure to include your email address and your web page address on your business cards, in your promotional materials, in print ads and on your letterhead.

   

  IF YOU ARE AN INVESTOR- ARE YOU IN BUSINESS?

  Section OB 1  of the Income Tax Act 1994 defines business to include “any profession, trade, manufacture, or undertaking carried on for pecuniary profit”

  Whether a taxpayer is in the business of investing is dependent on that taxpayer’s fact situation.    The leading “business” case in New Zealand is Grieve v CIR (1989).   In that case the judge set out the factors relevant to the inquiry as to whether a taxpayer is in business:

  • the nature of the taxpayer’s activities, and
  • the period over which the taxpayer engages in the activity, and
  • the scope of the taxpayer’s operations, and
  • the volume of transactions undertaken, and
  • the commitment of time, money and effort by the taxpayer, and
  • the pattern of activity, and
  • the financial results achieved by the activity.

  In determining whether income earned from investing should be declared in tax return it will depend if the investor is:

  • a passive investor

  • a speculative investor

  • a person in the business of investing

  A passive investor is a person whose primary aim is to derive dividend and interest income from a secure investment portfolio.   There may be a secondary hope or possibility that the investments will provide long-term capital appreciation.   A passive investor will make changes to the investment portfolio from time to time to achieve this aim.   Some investors may also be actively involved in monitoring their investment portfolios (or engage an investment advisor to do this for them) to ensure that the primary aim of maximising dividend and interest yield is maintained.   The passive investor will not buy or sell investments for short term gain.  The passive investor is not regarded to be in business as an investor.  

                  A speculative investor is someone who either acquires an investment with the intention of selling it, or carries on or carries out an undertaking or scheme, involving the investment, entered into or devised for the purpose of making a profit.   Investors are not speculative investors simply because they would like to see their investment capital increase, or that they may sell their investment if the capital increases.   Most passive investors fall within that description.   It is the person’s dominant purpose that is important in this distinction.   An investor may be a speculative investor in relation to one investment, and not in relation to another.    Profits derived or losses incurred in speculative investment activity are regarded as assessable income.

                     An investor who is fully in the business of investing should declare profits derived or losses incurred in that activity as assessable under Section CD 4 and deductible under Section BD 2 of the Income Tax Act 1994.