BusinessPlus June 2014 by EMA

BusinessPlus news | advice | learning | networking

Publicatio n o f t h e E m p l o ye r s & M a n u f a c t u r e r s A s s o c i a t i o n Inc

Boat launching just got easier!

EMA Election Manifesto launched In this issue:

TAX: The new R&D expensing regime Employee allowances Managing provisional tax Transfer Pricing! • Why not scrap performance appraisals? • “We’re becoming stupider, faster”: Gary Hamel • Move on bullying, stealing, lying... • US polls for free trade future

Issue 115 – June 2014 $6.30

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BusinessPlus is published by : The Employers and Manufacturers Association (Northern) Inc 159 Khyber Pass Rd, Grafton, Private Bag 92066, Victoria Street West, Auckland 1142 Ph: 09 367 0909 or 0800 800 362 Email: ema@ema.co.nz Website: www.ema.co.nz

CONTENTS Advocacy 04 Maintaining momentum in jobs, growth

05 Election year buzzword one: ‘inequality’

IN THE LOBBY: Bold policy a risk for small business

news Chief Executive: Kim Campbell Manager, Advocacy & Govt Relations: David Lowe Manager EMA Learning: David Foley Manager, Strategy & Enterprise: Mauro Barsi Waikato Denis Quigan 07 823 9311 Russell Drake 07 838 0018 Bay of Plenty Terry Arnold 07 575 8401

mob 027 203 0694 mob 021 686 621

06 Communication and staff support speed business recovery after a disaster

07 EMA to launch 6 point election manifesto

22 EXPORT: Pricing goods and

services the key to paying correct tax: Transfer pricing

mob 021 662 656

Rotorua / Taupo / South Waikato / Whakatane Clive Thomson 07 348 0334 mob 0274 372 808

BusinessPlus

23 Letter from Australia:

How many New Zealand businesses have tried and failed in Australia?

24 Free Trade with Taiwan superb opportunity

24 The US future is for free trade

Editor Gilbert Peterson Ph: 09 367 0916 gilbert.peterson@ema.co.nz

features 10

FINANCE: People want protection, not an insurance policy

Writer Mary MacKinven mary.mackinven@ema.co.nz

tax tips: The devilish details of the new R&D expensing regime

25 member noticeboard:

Gallagher security wins double in the US

Designer Ripeka Mikaere

25 Log invention opens new markets Advertising Sales Colin Gestro (09) 475 9313 colin@affinityads.com

27 Every boatie’s dream:

hands-free boat launch and retrieval

advice ISSN No. 1176-4953

26 29

08 Let’s scrap performance appraisals! 12

EMPLOYMENT CHAT: More on

bullying, stealing at work, and what if someone I hired doesn’t fit in?

19 Explaining how the tax treatment 20 Managing your provisional tax

BusinessPlus

learning

Boat launching just got easier!

of employee allowances will work payments smarter

news | advice | learning | networking

Publication of the Employers & Manufacturers Association Inc

09 Resourcefulness, not resources way to the future

SCHEDULE 28 Winter Briefings Schedule 2014

On the cover... The Balex boat launch and retrieving system is an invention from Balex Marine in Tauranga. Read all about it on page 27.

EMA Election Manifesto launched In this issue:

Issue 115 – June 2014 $6.30

ADVOCACY at work

Maintaining momentum in jobs, growth Finance Minister Bill English spoke to a big crowd at the EMA luncheon in the wake of his Budget 2014 last month mainly focused on managing the growing economy,. He said the Government’s surplus for 2014-15 was possible because of $11billion cuts to spending, and on lower crime and imprisonment rates. He also said the planned cut to the ACC motor vehicle levy could be equivalent to a 6c reduction on the company tax rate. He wants debt to reduce from 27% of GDP to 20% by 2020. The key was in smaller Government, which was better Government, he said. “The drivers of growth in 2017 and 2018 will be critically your confidence in investing.” EMA’s fortnightly e-report email newsletter was delivered to members on Budget Day, May 15 with a summary of key business issues. Inaugural meeting of the OH&S Forum

EMA manager of OH&S, Paul Jarvie, chairs EMA’s new OH&S Forum. The Forum has met for the first time and set about developing submissions on the discussion document outlining proposals for new health and safety regulations. Five sets of regulations are being developed, for: 1. general risk and workplace management 2. worker participation and representation 3. work involving hazardous substances 4. major hazard facilities 5. work involving asbestos The Ministry of Business, Innovation and Employment released the discussion paper, “Developing regulations to support the new Health and Safety at Work Act”. The Health

BusinessPlus

and Safety Reform Bill 2014 is currently before Select Committee and is expected to come into force next April. Submissions on its regulations are due by July 18. OH&S on employers’ minds

The chairman of WorkSafe NZ, Professor Gregor Coster, addressed the recent EMA Employers Forum on the health and safety reforms. Members put their hard questions to him, and expressed a genuine commitment to improving OH&S but a need for guidance and information. Professor Coster said employment agreements will govern employee responsibilities, but the focus of responsibility for OH&S will be on the CEO and board members according to their ability to influence workplace health and safety matters in the organization. He said the agency held both education and enforcement functions. Local city councils earn bouquets from EMA

Though EMA congratulated the Hamilton City Council for outperforming its financial targets and getting its finances back into shape, it also said the Council seemed to think it was still operating under the former Local Government Act. EMA executive officer Peter Atkinson (pictured) said at the Council’s Annual Plan hearing that the role of local government used to be to achieve the ‘social, economic, environmental and cultural wellbeing of the community’. But these words were replaced in the 2012 Act by the words: ‘to meet the current and future needs of communities for good-quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost-effective for households and businesses.’ But the council appears to be operating as if the former Act was still in effect. It also has a rare opportunity to change its rating system to one based on capital value.

“Hamilton Council’s goal to balance its books by 2017 looks achievable: saving $15 million this year and keeping debt down is a creditable achievement,’ Mr Atkinson said. “But the 3.8% increase in rates proposed is too high. “While we strongly support the Council’s plan to review its rating system there appears no willingness to remove the business differential. “Such a change would result in a fairer and more efficient rating system by aligning rates more closely with the benefits that ratepayers receive, and also with how other councils finance their activities. A re-think is required.” Tauranga City Council congratulated

The Tauranga council was congratulated for keeping its rates increase low, and for its special levy to address legacy storm water issues. Atkinson told the Council’s Annual Plan hearing overall that the Council was continuing to demonstrate responsible, business-like governance. “But Council debt is high, so we support the reductions in service levels as proposed, along with increases in user-pays fees and charges, and the rescheduling of some capital projects,” Mr Atkinson said. “We support the Council plan to introduce the special levy to remediate storm water issues. “We believe the tertiary Institution initiative is also a good strategic move with solid, long term prospects, and we support the development of the Tauranga Harbour Marine Precinct. “We note that though it has succeeded in making more industrial land available, the Council failed to achieve six of its other economic development goals. “In particular the number of businesses in Tauranga has declined slightly and the number of visitor nights in the city has fallen.”

ADVOCACY By Kim Campbell,

Election year buzzword one: ‘inequality’ (First published in NBR May 16, 2014)

In a quest for social justice this election year, inequality of incomes and wealth has, with the assistance of Thomas Piketty and others, become a buzzword. Obviously inequality is a fact of life and if everyone and everything were the same there would be no inequality and life would be more dismal because of it. But in any discussion of equality facts and emotions quickly become blurred. As Nobel economics laureate Amartya Sen put it, it is not whether equality is good but “…virtually all the approaches to the ethics of social arrangements that have stood the test of time… want equality of something. Incomeegalitarians demand equal incomes, welfare-egalitarians ask for equal welfare levels, and pure libertarians demand equality with respect to an entire class of rights and liberties.” As well the income pay gap between rich and poor is not so much about whether inequality is good or bad of itself, but whether it simply reflects differences in people’s lifestyle preferences, whether they pool their incomes with others, where they live, and whether they like to save. Then there are the sorts of inequality unlikely to upset anyone: young people earn less than older people; a 17 year old builder’s apprentice earns less than a surgeon; a lotto winner’s wealth is likely to be around twice what the average person earns in a lifetime. Education explains a large amount of earnings variation; the lifetime earnings of a tertiary graduate are double those of a person with no qualification. New Zealand sits about average amongst OECD nations for inequality though we used to be in a more equal position than most. In the 1970s New Zealand and the rest of the developed world underwent a major transition which changed social arrangements, the labour force,

industrial composition and ultimately incomes. Before then New Zealand had remarkably low unemployment and reasonably high wages, reflecting an economy whose products were in high demand globally and where workers were reasonably scarce. Women were largely absent from the labour force, with only 1 in 5 of them aged over 25 in the labour force compared to 75% today. The changes kept on coming. In 1982 the most common household and income arrangement (52%) was for one person in fulltime paid work and the other not in the workforce. Only 20% had both in full-time work. By 2012 the most common arrangement for families was to have two parents working full-time (40%). From the late 1980s to the mid1990s income inequality increased significantly and rapidly. New Zealand went from well under the OECD average to well above it for most of the 1990s. In the 2000s, however, inequality

flattened out but began to accelerate in countries such as Sweden and Finland which had previously maintained lower levels of inequality. Over the past decade inequality has unambiguously not increased in New Zealand; its been flat to declining, which is different from many other countries. For instance the median household income here grew 46% from 1994 to 2009, while middle incomes in the US are said not to have increased at all. The top 1% of our households receive 8% of income compared to the top 1% in the UK getting 14% of income and in the US, 18%. If inequality as an issue remains enigmatic there’s no question it is a distraction from the bigger, persistent challenge which is poverty and deprivation. Poverty is different from inequality. It is about “not enough” rather than simply “less than”. Unlike inequality, persistent poverty and hardship has not been flat lining. continued on pg6

“…virtually all the approaches to the ethics of social arrangements that have stood the test of time… want equality of something. Income-egalitarians demand equal incomes, welfareegalitarians ask for equal welfare levels, and pure libertarians demand equality with respect to an entire class of rights and liberties.” BusinessPlus

NEWS

Communication and staff support speed business recovery after a disaster Be prepared for a disaster! The University of Canterbury has published guidelines on handling staffing matters in a disaster following the Canterbury earthquakes. The booklets include: Shut Happens: A resilience guide for small business Resilience Within - A short guide to resilience for NGO’s Staffed or Stuffed: Taking responsibility for your people in a major disaster The latter is a practical, 16-page guide to making your business more resilient by looking after your staff in a disaster, so that your staff cope better and your business recovers more quickly. When disaster strikes, you will need to ask your staff to go the extra mile, the authors point out. They say research shows that

organisations with committed, motivated and loyal staff are far more likely to survive and emerge stronger following a disaster. Staff will only stand by you and

your business if they feel that you support them. The booklet describes three stages you will encounter in a major disaster or crisis: 1. Planning for your people (before disaster strikes) 2. Responding to the situation (after disaster strikes) 3. Rebuilding a better future In all stages, leadership is essential and a recurring theme is the importance of communication. The booklets were written with Government-funded research on ‘resilient organisations’, says Dr Bernard Walker, co-leader of the Building Resilient Infrastructure Organisations Project at the University of Canterbury. They are available to download for free at http://www.resorgs.org.nz/ Resources/booklets-guides.html

continued from pg5 But public opinion appears fixated on ‘pre-distribution’, welfare for working families, and an ‘eat the rich’ mind-set, rather than on an agenda aimed at improving the life expectations of the most vulnerable. Far less attention should be paid to differences among people in general, and far more to the persistence of poor conditions, which too often are found amongst people with no qualifications sole parent households, and Maori. The role of business role is to address this “not enough” scenario, and the modern business wants to help do just that. If you were of a cynical mind set you might say business just wants to increase the ability of consumers to buy its products and services to make more money and avert the social dysfunction that might otherwise disrupt the process. More generously business wants to focus on what will make all of us better off. So what would help do that?

BusinessPlus

“Public opinion appears fixated on ‘pre-distribution’, welfare for working families, and an ‘eat the rich’ mindset, rather than on an agenda aimed at improving the life expectations of the most vulnerable” Individual success is tied intrinsically to attitudes of diligence, hard work, education and up skilling. Some people will succeed no matter what, and in the poorest countries some people are extraordinarily wealthy. Talented people are always able to take care of themselves. For their part employers’ success is driven by a willingness to invest in new technology and advanced plant which will develop new skills, new products and boost productivity. As an organisation EMA has for decades fostered these things. We

urge our learning institutions to focus on developing the skills that will lift productivity. We require of our government institutions they be enablers, not inhibitors. Business seeks from government the smallest part possible of taxpayers’ resources devoted to its administrative machinery, with its focus firmly set on creating an economy where high value, productive capacity is rewarded. Next month: Election year buzzword II: a ‘living wage’ kim.campbell@ema.co.nz

NEWS

EMA to launch 6 point election manifesto EMA’s Election Manifesto is about to be launched, singling out particular policies for skills, innovation and local government consent processes. EMA wants early adoption of these by the next government. EMA believes these issues will further encourage business success; the Manifesto doesn’t pretend to cover off everything business needs. The introduction to it says “New Zealand is reliant on businesses being successful and providing the goods and services we all rely on, jobs, incomes, and funding (tax) for government. “The brave business owner/operator should not be taken for granted and deserves the community’s respect through a supportive policy environment”. Key points in the EMA Manifesto are: 1. EDUCATION, SKILLS AND MIGRANTS

Businesses are reporting a shortage of skills and some young people leaving school without adequate work readiness skills. Plus more needs to be done to encourage careers in the trades. a) Employment Readiness Certificates be issued to all students when leaving secondary school so a meaning ful assessment is available to employers of that person’s skills in reading, writing, mathematics, on-time attendance and attitude. b) Increase the number of students choosing a trades career through: (i) A national PR campaign highlighting trades as a valuable career choice, and encouraging influencers of student’s career decisions to not discourage high achieving students from a trades career. (ii) All students to have access to quality independent expert career advisors who have no bias towards academia or trades. c) A temporary work visa automatically extended when the migrant continues to work for, and with the support of, the original employer, unless Immigration NZ can show a suitable New Zealander is available to replace that migrant.

2. INNOVATION, RESEARCH AND DEVELOPMENT

Current incentives to encourage Kiwi ingenuity to drive the high value, high wage economy are well intentioned but complex and narrow and exclude other valuable innovation. a) Broaden and simplify the application of grants, accelerated depreciation and tax credits to ensure equitable encouragement is available to all innovation. b) Introduce soft loans as another form of encouraging innovation. 3. LOCAL GOVERNMENT CONSENTING PROCESSES

Consenting is slow and unduly bureaucratic, and sometimes more concerned with being more protective of local authorities than facilitating the growth and development of their region. a) Require all local authorities that issue building and resource consents to: (i) Establish and publish a standard for total elapsed time between a consent application being submitted and being granted, with unreasonable standards being subject to judicial review. (ii) Publicise their performance in meeting those standards. b) Legislate to require building and resource consent functions to be delivered by a co-located, single pointof-contact in each territory. c) Fully review the local authority fire regulations to ensure common sense and context is applied. 4. SMALL BUSINESS GROWTH

Small business is a vital to New Zealand’s success but some choose to remain small because the factors required to take the next step in growth are viewed as too difficult or too risky. Remaining small or growing slowly means the economy, workers and owners can miss out on the mutual benefits of expansion, innovation and growth. a) Allow experienced expert company directors to be appointed director of a small business without exposing them to the liabilities that company directors otherwise face, provided they have no

direct financial interest in the business. b) Encourage mergers of small businesses by allowing them a two-year partial tax holiday following a merger or takeover, with the tax holiday only applying on the taxable income additional to that of the combined taxable income of the small businesses prior to merger or takeover. (Small business is a business that employs fewer than 20 employees. Combined taxable income is calculated by taking the average of each businesses taxable income for two years prior and adding them together.)

5. SUPERANNUATION AND BUSINESS INVESTMENT

Retirement savings is important for ensuring our older people can live in dignity, for addressing the fiscal costs of the increasing aging population, and assisting businesses expand and grow through retirement savings being invested in them. Providing more flexibility in the age to access retirement savings would be desirable. a) The age of entitlement for National Superannuation be increased to 67, phased in by 2023. The age of withdrawal from KiwiSaver to remain 65. b) Reduce tax on KiwiSaver and private long-term savings to 15% and remove the KiwiSaver member tax credit of $541 per annum. c) Government to create an equitable commercial annuity product as an alternative option to withdrawing KiwiSaver and other retirement savings in a lump sum. (Private long-term savings be accessed at age 50 or 5 years after commencement, whichever is the later.)

6. CURRENT POLICIES

a) Retain or reduce current income tax and company tax thresholds b) Retain a comprehensive GST regime c) Continue to progress Free Trade Agreements d) Retain employment trial periods e) Retain youth rates f) Retain current Emissions Trading Scheme g) Retain current Hazardous Substances and New Organisms regulations h) Retain or reduce current ACC levy rates BusinessPlus

ADVICE By Warren Dalzell

Let’s scrap performance appraisals Second only to making an employee’s position redundant, managers say making performance appraisals is the task they dislike the most. This is understandable given that the traditional process is fundamentally flawed. Performance appraisals do not fit with the values-based, vision-driven, participative work environments which power today’s responsive companies. It smacks of old fashioned, paternalistic, autocratic management which treats employees as possessions. In its worst form, an annual appraisal has a manager judging in retrospect

“In enforcing a flawed Performance Management system, the organization through its despised HR department does itself great harm”

the performance of an employee, grading it in word and number. Often unmeasured and unevidenced, poorly recollected, imprecisely written and lacking input from colleagues, the rating is no more than one person’s opinion at one point in time. Of greater concern is that bureaucratic organizations may adjust them to a bell curve, and base decisions on pay, promotion, transfer and termination upon these unreliable assessments. These outcomes appear to be the dominant reasons for the traditional Performance Appraisal – ideas of performance enhancement and skills development in a learning organization seem to be less sought. The process is painful for all – manager, employee and organization. The manager often prepares badly, lacks skill in feedback, fails to back opinion with example, and under pressure adopts an accusatory tone.

BusinessPlus

The employee becomes defensive, argumentative and resentful. Failed meeting! Damaged relationship! In enforcing a flawed Performance Management system, the organization through its despised HR department does itself great harm. It causes employees to become cynical, disengaged and restive. In a market

competing for talent, how dumb is that? There is plenty of new thinking on motivation, engagement, teamwork and reward (see below). Most seem to suggest scrapping performance appraisals per se, and replacing them with a more mature and respectful approach.

Elements of a better way may include: •

Crystal clear vision, purpose and values to integrate the efforts of people.

•

Develop a culture where feedback is frequent, participative and honest. People are inspired by positive feedback.

•

Focus forward more than backward. More goal setting, less review.

•

Separate out discussions about performance from those about future skills development and career plans.

•

Talk about performance regularly, linking with team and departmental objectives.

•

Empower people to take responsibility for handling problems, and remove the fear of reprimand if a properly thought-out solution misfires.

•

Let employees create their own goals, aligned to department goals and KPIs. Set and reset goals frequently.

•

Since employees work into and with several teams and matrices, involve a number of co-managers in the feedbacks.

•

Train managers in leadership and coaching and value their coaching contributions, enabling them to have the time to coach.

•

Beware of Performance Incentive Pay schemes. Outside of field salespeople, few work alone. Individual contribution is hard to measure and incentive pay seldom changes behaviours. Soon, At Risk pay becomes expected and if not forthcoming produces dispute and disgruntlement.

Footnote: This discussion excludes the obligation in New Zealand employment law, where dismissal for other than misconduct must generally be preceded by an arduous and meticulous competency process, involving appraisal and coaching in a rules-based evidential progress. Warren Dalzell is Director of Altiora Associates warren@altiora.co.nz tel 021 905 026

LEARNING

Resourcefulness, not resources way to the future Today’s management practice is based on a military model that is failing to keep up with the pace of change, said US management guru Gary Hamel in Auckland last month. The world is becoming more turbulent than our organisations are becoming resilient. Change when it comes occurs belatedly and convulsively. Our organisations are not changing as fast as the world around us. At what point do they become irrelevant? Whereas the social skills of management practice – the means by which we organize ourselves to achieve things – has been the most successful of all human achievements, the paradigm shift in our lifetime is that more of the same no longer works. The traditional hierarchy pyramid, the exoskeleton of bureaucracy, has become an enormous impediment to change. It has to be turned upside down. Because knowledge and information is expanding faster than anyone can cope with “we are becoming stupider, faster.” What really matters now is not resources, which can’t protect an organization from the innovations of others, but resourcefulness. By imbedding innovation as instinctive and natural in their culture, organisations can inoculate themselves against the destruction of crisis while ensuring their future. EMA was a major sponsor of the day-long session on the theme of “Facing the Future: What Really Matters Now”. The world is no longer an extrapolation of the past. To insure against crumbling barriers and irrelevance, you have to be out innovating. “For innovation to occur the things that matter most are initiative, imagination and passion, and these are gifts that cannot be managed in any traditional sense. This is why management must be turned on its head.”

The top three capabilities are gifts in people. They may bring them to the workplace or not; you can’t command imagination or passion. You need people with: • Passion • Imagination • Initiative • Intellect • Diligence

Gary Hamel

But there’s always going to be a ‘box’ with its controls, responsibility and accountability, so how we build this box is very important. How do we achieve control, alignment, precision and constancy in a culture where creativity, adaptability and engagement are nurtured and rewarded? We used to get by with such practices as detailed procedures, close supervision, restricted spending limits and limiting authority whereas initiative, and passion which are hallmarks of creativity are directly related to autonomy. Change in organisations requires individual freedom, contrary to the premise under which organisations succeeded in the past. The old model was all about driving variances out and driving conformity into an organisation’s practices. The

“The dark side of bureaucracy is that it systematically disempowers”

dark side of bureaucracy is that it systematically disempowers. We are not going to get a deeply adaptable organisation without a stream of innovation flowing into and from the business, and that won’t happen unless people are excited about their work. We need to start by setting a new set of principles which might include legitimizing dissent, thinking like an activist, aiming higher… “you cannot build a high performance organization by applying venal values.” Worldwide stats repeatedly show only 14 % of people are highly engaged in their workplace, 62% modestly engaged and 24% disengaged - they are “maliciously compliant.’ This hasn’t changed in decades and is the same across all countries despite human resource and leadership development. Your profit is directly related to your employees’ passion or engagement in your business. People are not against change, as managers often believe; that’s not the problem. Values such as growth, quality, leadership are always subservient to human emotions such as joy, truth, honor and fidelity. We need to go deeper than solving problems like efficiency of scale and success. Visit the ‘open innovation platform’ www.hackmanagement.com to read about these concepts, and be inspired by a thousand case studies of companies worldwide including in New Zealand. BusinessPlus

FINANCE By CEO Gary Dransfield

People want protection, not an insurance policy Insurance companies are genuine in their efforts to promote the value of insurance and assist customers with policies and claims and for many customers those efforts are successful and they are satisfied with their insurance experience. But many others are as confused as ever. I believe strategic clarity is essential for a sustainable insurance business and it must be a leadership priority. I also believe clarity with our customers and gaining their confidence about insurance product value is essential. We can and will make greater use of digital technology to assist with this but we need to be careful not to confuse communications volume with quality. Technology is leading to massive increases in the volume of information being produced though not necessarily the quality. The American political forecaster, Nate Silver summarises this well when he says a lot of information is just noise and it is drowning out important signals or messages. A current example in New Zealand is the re-introduction of sum-insured insurance policies. Private insurers have spent millions of dollars and used a variety of traditional and digital communications platforms trying to communicate about this to customers. But the volume of information on this and the noise is drowning out some important signals. The important messages in regard to sum-insured are:

• •

•

This is not a new approach It is beneficial for consumers because it allows them to tailor their insurance purchases to suit their needs And, when properly used, its better for customers and insurers than any alternative approach.

We need to understand people do not want an insurance policy. They want protection. If they believe their insurance policy is not providing them with protection they will worry and believe insurance has no value for them. And they look to their insurance company to assist in making a decision about how much protection they need. You can communicate with customers via a laptop, desktop, tablet, e-reader, iPhone or a sheet of papyrus – it makes no difference. If we miss our customers’ signal about what they need in the noise of how good or bad insurance is for them our business will not succeed. The issues associated with the change to sum-insured are instructive. It is assumed the more information customers have, the more likely they are to make better choices in regard

to the financial services suited to their needs and risk preferences. Advances in technology are assumed also to enable better consumer access to essential services and solutions to issues around unequal access to information. But the fact many consumers remain confused about sum-insured suggests these assumptions may not always be correct. If the insurance industry does not manage issues such as sum-insured well, the consequences are far reaching. I believe there are a number of opportunities for us to improve the re-introduction of sum-insured policies. At Vero we are currently working on these. And insurance companies are best placed to bear risk. We also recognise that customers want both information and guidance whenever significant changes are made to insurance products. No matter how advanced we are with information management, I believe financial services will continue to be marketed with a mix of technology and personal engagement. Gary Dransfield is the CEO of Vero Insurance New Zealand.

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EMPLOYMENT CHAT

More on bullying, stealing at work, and what I have a worker saying that I have not protected her from bullying or done enough to investigate her complaint made a month ago initially. She’s resigned and taking out a personal grievance claim. What should I do? – Don

by not taking appropriate action. It’s time to bring in a solicitor, I’m afraid. Call our EMALegal service for a consultation.

Dear Don If you agree with her accusation, that you didn’t do enough, there is not much defence. An apology might help alleviate her stress and even put a stop to the claim. It could open up a way to resolve the problem. It may also be taken into account in the event of the employee taking their case to the Employment Relations Authority. From now on in this case you need to document every communication with the employee and also collect records on the issue from the point of her bullying complaint. Even if she indicates she is dropping the claim, if she hasn’t already formally raised a personal grievance she can still do so within 90 days of the alleged action or inaction. The Authority could even decide that you as employer effectively bullied her if you did not investigate properly. And/or it could decide you constructively dismissed the employee

Can I suspend an employee during a disciplinary process? He was very trusted but has been stealing from the company and I can’t bear to see him around. – Diane Dear Diane When you have accused an employee of serious misconduct you’ll want to investigate the allegations carefully and give your employee the opportunity to answer them. Suspension is a serious step that may hamper the employee from preparing a defence. It could harden suspicion into a belief of wrong doing that may have undue influence on the investigation. Also keep in mind that suspension can have a devastating effect on an employee’s future career, even if the allegations are unfounded or dismissed. You may have reasonable grounds for suspension if the serious misconduct allegations against him directly affect his ability to carry out his duties. But no matter how grave the allegations, before suspending the

suspected employee there are steps you need to take: • Examine the employee’s contract for stipulations or procedures to be followed in a case of suspension for misconduct, including agreements about pay. • Inform your employee of the allegations and any facts that support them. • Advise your employee that you are considering suspension, and explain why. • Invite your employee to state a case for avoiding suspension; consider their views carefully. • Determine whether the employee’s presence in the workplace poses a risk to health and safety, sabotage of the company or any other serious danger. • Consider if a suspension in this case is justifiable and fair. • If you decide to suspend the employee, notify them and give your reasons. • Assure your employee that the suspension period will be as short as possible pending an investigation, and that it is not a dismissal. • Ask your employee to be available for further interviews or a return to work. If you have followed a fair and reasonable process preceding a

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BusinessPlus

10/06/13 12:42 PM

EMPLOYMENT CHAT

if someone I hired doesn’t fit in? suspension, as outlined above, you should be safe from legal challenges even if the charges against your employee should prove false. You are strongly advised to better protect yourself against litigation, by including suspension procedures in your employment contracts, and by following them to the letter. Ideally the relevant employment agreement will provide for suspension in disciplinary circumstances. You take a risk by suspending without having such contractual authority in place, but you may be justified in doing so if the risk of the employee remaining in the business is high.

I’m unhappy that a member of staff does not seem to fit our core values and culture. How do I make someone fit these, or fire them because they don’t? It’s quite serious for morale around here. Their dress, way of speaking and general lack of creativity….. – Simon Dear Simon Culture is the collection of internalized rules of behaviour for the

people in your company. Those rules form the basis for your core values. By identifying your core values and making them explicit, you shape your culture. Your core values and culture provide a moral compass for your people, as well as a basis for consistent decision-making and guidance when hiring and managing staff. A few short statements should be able to state very clearly the type of behaviour you expect from your people. They need to be unique to your company and not things you naturally expect of everyone such as honesty.  If you can’t judge a person’s performance against a clear set of values that she has been given, you might look at this as a general role performance issue. Follow the usual procedures of investigation in good faith. After all, you did hire this person… • By the EMA communications team in consultation with EMA Advice, and loosely based on real calls to EMA’s AdviceLine. All names are fictional. The information in this article is a guide only and not to be used as business advice without further consultation.

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EMA members can start with our free AdviceLine team at phone 09-367 0909 or 0800 300 362 (within New Zealand), and 1800 300 362 (from Australia), 8am-8pm weekdays. Alternatively, email advice@ema.co.nz or read or print information such as the A-Z of Employing – a manager’s guide on more than 100 specific employment topics, at www.ema.co.nz

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IN THE LOBBY

Bold policy a risk for small Policies for the economy matter greatly to enterprise, so business has taken much interest in Labour’s savings and monetary policy. Compulsory KiwiSaver - with contributions that can be increased at will by the government to increase savings and reduce inflation - is a bold proposal. It’s bold in two ways. First, in making KiwiSaver compulsory. Compulsion is a drastic step and it is surprising this hasn’t drawn more controversy. Compulsion could be hard on people on lower incomes, some of whom might be unable to contribute. It’s also surprising because there’s no evidence that compulsory KiwiSaver would actually increase national savings. We already have a high uptake of KiwiSaver, so compulsion wouldn’t increase it a lot. Moreover, Treasury research shows KiwiSaver hasn’t greatly increased overall saving anyway, but has simply led to existing savings being swapped to KiwiSaver from other savings vehicles. More national savings is certainly desirable, but many would feel this is better coming from a wellfunctioning business environment and higher prosperity than from compulsion. Labour’s proposal is also bold in

the way it seeks to compulsorily take extra contributions to put into KiwiSaver accounts, in an attempt to reduce inflationary pressures in the economy. This hasn’t been tried anywhere else in the world, so it is hard to know whether or not it would work. Labour hasn’t released cost or benefit calculations for the proposal. Economists and other commentators have produced their own calculations, some suggesting that preventing interest rates from rising by one per cent could mean people’s take home pay being reduced by as much as $70 a week. Economists and commentators have been trying to tease out this far-reaching proposal would have on the economy. They have expressed concern that the different aims of the proposal might work against each other and perhaps bring unwanted consequences. For example, the proposal aims to lift national saving but it also aims to reduce interest rates as well, which is contradictory, because lower interest rates penalise savers. Lower interest rates also encourage

Specialist Employment Lawyers Our legal team spend 100% of their time working solely with employers, to help build and shape New Zealand businesses. Come in, sit down and talk to us about what’s next for your business – if you’re ready to take the next step, we’re ready to make it happen.

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more debt. If the proposal succeeded in keeping interest rates lower, it would encourage more borrowing, most probably in housing - and without improving supply, house prices would rise. The proposal could lead to more volatile share prices. It would boost KiwiSaver contributions when the economy was booming - so KiwiSaver fund managers would buy more stocks when prices were high. But when the economy was less strong KiwiSaver contributions would be lower, meaning less purchase of stocks by fund managers. So swings in asset prices could be heightened rather than smoothed, making share prices more volatile. The aim of the proposal is to give the Reserve Bank another tool to help drive demand out of the economy – the idea is that using the variable savings tool would mean less need to use interest rates as a lever to reduce demand. But given the large amounts that would have to be taken out of people’s pay packets to reduce demand, it is most likely that the Reserve Bank would have to continue to use interest rate rises as well.

Phil O’Reilly

business Politically, there would be dangers in granting wider powers to the Reserve Bank. Under Labour’s proposal the Reserve Bank Governor would have control not only over monetary and savings policy but also employment and investment policies. This huge amount of power would almost result in the Reserve Bank Governor being a de facto Prime Minister. Politics could be compromised. Businesses will be most concerned with how this proposal might affect them. Unfortunately, Labour’s proposal would create divisions between different kinds of businesses. Some exporters could gain from it, but many small businesses could lose out. Exporters were no doubt top of mind for Labour when this proposal was being drafted. Over recent

years they have suffered from the high $NZ making their products comparatively more expensive, reducing their revenues and profits. Labour’s focus on their predicament will have been appreciated. If Labour’s proposal succeeded in cooling the domestic economy and bringing down the level of the $NZ, that would be good for exporters. But the proposal could be a risk for small domestically-focused firms. A key task of Labour’s proposal is to use extra KiwiSaver contributions to dampen demand in the domestic economy. Small firms depend on a healthy level of demand – without it they will not stay in business long. Small firms, allowed to grow, can become large exporters earning valuable overseas exchange. A savings and monetary policy that

shrivelled demand and prevented small businesses from growing into large, successful ones would not be good for New Zealand. We currently have a monetary policy regime that is relatively neutral across different types of business, with interest rates impacting fairly equally on all kinds of businesses. But compulsory savings as an additional monetary policy lever could bring winners and losers. On this basis, the business community want more information and reassurances about Labour’s savings and monetary proposal before accepting it as an improvement on current policy settings. Phil O’Reilly is Chief Executive BusinessNZ www.businessnz.org.nz

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Keep your nger on the pulse Your people are one of your biggest assets. To make sure your business is performing at its best you need to get their pay and benefits ‘just right’. That’s where we can help. Using our market intelligence you can keep your finger on the pulse of market trends and act with confidence. The National Employers Wage and Salary Survey covers 216 positions. Our comprehensive reports include splits by industry, location and revenue bands: Salary reports: Reflect Salary ranges by position, location, revenue bandings and industry. Beneets and Conditions reports: Position specific analysis of benefits and conditions. You’ll find sample reports as well as a full list of positions and descriptions on our website.

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TAX TIPS Jo Doolan

The devilish details of the new R&D expensing regime This year’s responsible budget included some pre-election lollies and the lofty aim of increasing our Research and Development spend to one per cent of GDP. After canning Labour’s R&D tax grants we now have incentives aimed at the smaller start-up companies. The sweetener is those that qualify can cash out their tax losses and given cash flow is a struggle in the early years, this is a winner. Under current legislation R&D expenditure is generally tax deductible if it is expensed for accounting under IAS 38 (a very detailed accounting standard that most small and medium companies do not apply), or under what we colloquially call old GAAP. The proposed changes are to apply from income years beginning on or after 1 April 2015, with the caveat that the details behind the rules are not yet available. Unsubstantiated rumours are flying, like software will be excluded! Watch this space. Under the proposals in their first year, R&D intensive start-up companies will be able to get cash for up to $500,000 of tax losses resulting from qualifying R&D expenditure. The cash benefit of this is $140,000. After the first year, the gross loss cap increases by $300,000 a year until it

“Under the proposals in their first year, R&D intensive start-up companies will be able to get cash for up to $500,000 of tax losses resulting from qualifying R&D”

reaches the maximum of $2 million. By the time the cap moves to $2 million of losses in year six you could be receiving $560,000 of cash back. The intention is to provide a timing benefit, not a grant since companies are obliged to return eventually the value of any cashed out loss taken by either taxes paid or from any gain on sale. If you sell before you have repaid the cash received there will be a quasicapital gains tax to ensure you pay the amount back. The two main requirements for losses to have resulted from qualifying R&D expenditure are: • 20% of the company’s wage and salary expenditure must be on R&D; this includes shareholder salaries that are subject to PAYE, contracted labour, and 66% of contracted R&D, but does not include sweat equity, (shares allocated in lieu or the payment of a market salary or wage or unpaid work); • The company must carry on eligible R&D which is consistent with the definition used in the accounting standard NZIAS 38 on intangible assets. As we’ve already said, NZIAS 38 is a complicated accounting standard, so the practical details around how this will work are going to be critical. Broadly speaking, under this standard costs are expensed unless and until a recognisable intangible asset is created (ie the asset meets key criteria around feasibility and the probability of income generation from the asset). If you have several companies in your group then the group has to meet both the tax loss requirements and the wage threshold. In addition, the company cannot be a look-through entity, a qualifying company, a special corporate entity or publicly listed on a stock exchange. The result of these restrictions will seriously limit the benefit of these provisions.

“By the time the cap moves to $2 million of losses in year six you could be receiving $560,000 of cash back”

We are still waiting for a list of activities and expenses that will be excluded from the rules. In addition to the cash-out provisions there is also a proposal to allow for a deduction of capitalised development expenditure that does not qualify for depreciation under the tax rules. The deduction arises on the write-off of development expenditure for accounting purposes irrespective of whether the project has been abandoned before completion or after some utility. Again there is a clawback proposal on a subsequent sale. The depreciable intangible property definitions are also to be extended. Overall this is a great initiative and will help the companies who qualify. The critical issue will be to ensure the compliance costs associated with it do not outweigh the benefit, and the extra sweetener would be to ensure we have certainty around the longevity of these types of incentives by having cross party support. Overall, on again off again incentives are detrimental. Joanna Doolan is a Tax Partner with EY and Claire Dilks is a Senior Manager with EY BusinessPlus

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ADVICE By Greg Neill, Senior Associate – Tax, Russell McVeagh, Auckland

Explaining how the tax treatment of employee allowances will work Many members will be aware the law is changing in relation to the tax treatment of certain allowances provided to employees in connection with their employment duties. (see also BusinessPlus, May 2014) For those employers that provide employee allowances, particularly in relation to accommodation, meals or distinctive clothing, it is now timely to consider the law changes and ensure that your tax position and associated payroll systems will be consistent with the new law. I spoke about the upcoming law changes at the EMA’s national payroll conference earlier this year. Since the conference a number of amendments have been proposed to the Bill in order to improve the workability, clarity and fairness of the tax law in this area. One of the more significant new rules relates to accommodation allowances provided to employees for out-of-town secondments and for employees working on out-of-town capital asset projects. Such allowances will be exempt and not taxable to an employee where: (a) The employment duties of an employee require them to work at a “distant workplace”. A “distant workplace” is essentially a workplace other than an employee’s usual workplace not within a reasonable

“The requirement to base the availability of the exemption on the “expectation” of an employer raises questions over how that expectation is to be determined or proved”

daily travelling distance of the employee’s residence. (b) The period of the employee’s employment or service at the “distant workplace” is a period of continuous work. This means an employee has on going duties of employment that must be performed to a significant extent at a distant workplace which require the employee to stay there for one or more nights. The engagement of an employee at the distant workplace must only be for a period that falls within one of the specified time limits: two years for out-of-town secondments and three years for out-of-town capital projects of limited duration. None of the specific exclusions apply (for example, the allowance cannot be provided as an express trade-off or substitution for salary). The Bill has been revised to clarify that it is the employer’s expectation at the start of the period of secondment, or the start of the project, that is relevant in determining whether the employee’s engagement at the distant workplace will be within the two or three year period. This means that, if an employer’s expectation is for an employee to be away for (say) four years on a particular capital asset restoration project, the exemption would not be available for any accommodation allowance provided. If the employer revises their expectation for the period away to two years, the Bill now permits the employer to apply the exemption from the point at which the revised expectation is reached. The requirement to base the availability of the exemption on the “expectation” of an employer raises questions over how that expectation is to be determined or proved. Employers should think about putting appropriate documentation processes in place to record such expectations

“The Bill now provides that a room or lodging that is provided for certain shift workers... will not be taxable as it will not meet the definition of accommodation under the new rules” so that any tax position adopted is able to be more easily explained if subsequently questioned by Inland Revenue. The other new rules in the Bill relate to accommodation allowances for employees required to work at multiple workplaces on an on going basis, accommodation allowances for conferences and training courses, meal allowances and allowances for distinctive work clothing. In addition, the Bill now provides that a room or lodging that is provided for certain shift workers (eg ambulance staff and care-givers) will not be taxable as it will not meet the definition of “accommodation” under the new rules. The law changes will generally apply from 1 April 2015, subject to certain exceptions including allowances relating to Canterbury earthquake recovery projects. If you have any questions, or would like to discuss the law changes, please contact me at: greg.neill@ russellmcveagh.com +64 9 367 8879 BusinessPlus

Managing your provisional tax Financing your provisional tax payments via tax pooling is a smart business practice that can save you money in the new financial year and free up your cash flow for other things. Provisional tax can wreak havoc with your cash flow when you need it most. Making three equal payments to Inland Revenue (IRD) based on what you think your income tax will be can be tricky. Inflexible payment dates can also be inconvenient. Most SMEs pay provisional tax on 28 August, 15 January and 7 May which do not suit some businesses. For many, the 28 August provisional tax payment occurs near the beginning of the new financial year, making it difficult for businesses to gauge accurately how much income tax they will need to pay. The 15 January payment falls after Christmas. Businesses may feel the pinch during what is traditionally a slow period, especially if they paid festive season bonuses to staff. Tax payments may not be processed if people are on annual leave. More than half of respondents to a recent EMA poll on tax payment practices and tax pooling (see May issue of BusinessPlus) reported the January to March period was the toughest in terms of cash flow. The 7 May payment can be painful for those who have been hit

Mark Ridling and his wife Leonie used tax pooling to defer an untimely provisional tax payment.

“... it’s a great service and I will certainly recommend it to others, and I have already done so” by a terminal tax payment for the previous year. Talk about a doublewhammy! Underpaying provisional tax is costly. IRD late payment penalties are charged up to 20% per annum and use of money interest (UOMI) at 8.4%.

“I was concerned that if I paid my taxes to a third party, I might later discover my hard earned dollars would go into some bank account in the Bahamas, never to be found again” 20

BusinessPlus

However, businesses can manage the uncertainty around provisional tax by financing these payments via a tax pooling intermediary. This lets owners defer their payments to a time that suits them, without incurring late payment penalties and UOMI.

How financing your tax works A tax pooling intermediary pays provisional tax to the IRD for you, and you repay the intermediary at an agreed date in the future. Businesses only pay the tax bill that is due at the end. There is no need to pay back the finance if you do not end up needing all the tax. It is cheaper than many other financing options – Tax Management

TAX MANAGEMENT

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House and Building Wash Company benefits from tax pooling The House & Building Wash Company owner Mark Ridling managed his cash flow by using tax pooling to defer a provisional tax payment. Now he encourages others with seasonal or fluctuating income to do the same. The Auckland-based business has a client base of around 9000 and has been experiencing rapid growth (The company made significant six-figure revenue in its last financial year). This rapid income growth can make it hard to predict how much

provisional tax it has to pay. In addition, its income is quite seasonal. Revenue almost triples in spring, but cash flow is tight during winter. Mark was initially sceptical when told he could delay his winter provisional tax payment for several months. “I was concerned that if I paid my taxes to a third party, I might later discover my hard earned dollars would go into some bank account in the Bahamas, never to be found again,” he says. After his accountant alleviated those concerns, Mark used tax pooling to delay his provisional tax payment until spring, when his cash flow improved, and then repaid the finance. He says others who might struggle to pay their provisional tax should do the same. “... it’s a great service and I will

certainly recommend it to others, and I have already done so,” Mark said. TMNZ, New Zealand’s largest and oldest tax pooling intermediary, has helped more than 21,000 SMEs save more than $30 million on IRD compliance costs. As an EMA partner, TMNZ offers special rates. Call 0800 829 888 or email admin@ tmnz.co.nz to find out how TMNZ can help you.

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BusinessPlus

By Mary MacKinven

Pricing goods and services the key to paying correct tax: Transfer pricing New Zealand has a nice tax authority which does not set out to be adversarial, but unlike many countries, is open to helping businesses prevent tax avoidance in their cross-border transactions. That was a message relayed by BDO taxation partner Iain Craig at the ExportNZ Auckland workshop on Transfer Pricing last month. Inland Revenue’s (IRD) Transfer Pricing (TP) Unit focus is education and voluntary compliance. The unit’s advice is to ensure they pay fair amounts of tax in the right tax jurisdiction. Tax authorities want to ensure an inter-company price is equivalent to an ‘arm’s length’ price, to prevent the loss of tax revenue. The arm’s length price is one at which two unrelated parties would agree to conduct a transaction. Craig said there are two ways to look at the definition of TP: 1. The prices paid between members of one “multinational” enterprise for goods, services and intangibles; and 2. The manipulation of prices by associated businesses in cross-border transactions with the objective of transferring profits earned in one tax jurisdiction to another tax jurisdiction (in many cases a low tax jurisdiction). He said businesses need to know that IRD really wants to front-foot with taxpayers on TP, to help prevent very expensive and destructive cross-border disputes. IRD only steps in if a business is not paying enough tax in New Zealand. IR’s principal advisor in its Transfer Pricing Unit, Kriti Velji based in Auckland, described the help available to business on TP, and recommended visiting www.ird.govt.nz for information. “We are open about policy and trying to resolve issues rather than audit,” she said. A strict new Australian approach to transfer pricing will impact New Zealand businesses with Australian operations. The Australian Tax Office has indicated that recent law

BusinessPlus

“Last year IRD prepared a record 21 Advanced Pricing Agreements (APAs), and the demand is increasing.” These can be provided for an application fee in about three months; or as a letter that will say ‘as long as you follow this methodology we will be happy’. She stressed that businesses working across tax jurisdictions, should document their pricing activity and be able to justify their ‘arm’s length’ amount was calculated using one of five recognised methods: • The comparable uncontrolled price method • The resale price method • The cost plus method • The profit split method • The comparable profits method However, the burden of proof rests on IRD, not the taxpayer, to show the IRD’s measurement is more reliable than the taxpayer’s. “But IRD can impose a substitute method and make you work it out on that basis,” said Ian Craig. As a rule of thumb a mark-up for high-tech products is 15%, and for management consulting 7.5%. Royalty rates must be set to comply with one of the five methods above. Documented pricing behaviour is limited to three years and should include forecasts and previous budgets. IRD steps in to help business in disputes with foreign tax authorities and has won refunds for taxpayers. “We will talk to them and back you up… and work with them to avoid double tax. “If you have issues such as problems with an aggressive tax regime overseas, come and talk to us. …If Australia asks for more documentation then we do that. China asks for different reports. changes allow it to disregard or reconstruct related party transactions where the economic substance does not match the legal form. The test is no longer only whether the transfer price is ‘arms-length’,

“Know your jurisdiction, eg, what tax is to be paid on management fees [in each country].” And remember the other offshore tax types eg, income tax for overseas staff, VAT, Customs and ex-pat issues. OECD and anti- bribery assessment

NZ supports the OECD Anti-bribery Convention, and emerging markets tend to pose particular risks when securing contracts and starting business activities. Also check out your business risk exposure by answering the 10-point anti-bribery questions to assess your risk of noncompliance with international rules (Available at oecd.org.nz) The OECD uses New Zealand’s IRD for helping develop these guidelines because our country is small and unbiased, Velji said. BEPS

In New Zealand the Income Tax Act 2007 defines TP in a mere four pages but there are screeds of guidelines from the OECD which is heavily involved in reviewing base erosion and profit sharing (BEPS). Craig said TP is more an art than a science. Outsourcing, changes in logistics and the increasingly digital economy present new challenges for tax authorities worldwide. The global financial crisis also highlighted TP as governments scrambled to collect the money they think is theirs. BusinessPlus is interested in whether EMA should run a session focussed entirely on the five available transfer pricing methods as listed above. If you are please email to: gilbert.peterson@ema.co.nz

but also whether the transaction itself is at arm’s length ie would the transaction have taken place between independent parties? Also announced are enhanced transfer pricing documentation requirements.

Letter from Australia from Marketing Specialist Bella Katz

How many New Zealand businesses have tried and failed to succeed in Australia? I’ve had this conversation recently with a number of expats here in Oz, all of us wondering if there’s a list somewhere that identifies road kill, along with the usual glory story. You have to dig deep to find the one or two companies willing to divulge the reasons for their spectacular Australian failures. I wish more CEOs and business owners shared stories of strategies gone wrong, without purely paying lip service to bad economic conditions. There’s so much to learn from mistakes – our parents told us when we were toddlers and they were right! At the recent Go Global conference in Auckland, I thought about how valuable it would be to have presenters whose businesses had suffered failures, not just successes. I’d like to know how they turned things around or why they decided to pull out altogether. In Australia that might be Michael Hill, The Warehouse, Pumpkin Patch. When Bruce Walkley, GM of Pumpkin Patch Direct joined DHL’s Country Manager, Tim Baxter on stage, I thought “Excellent, some honest learnings coming our way.” As it happened, a few weeks before that conference Pumpkin Patch announced a staggering fall in halfyear earnings of 98%. This week they are the second worst performing stock on New Zealand’s All Ordinaries Index. Why so glum? “The trading environment is volatile and continues to be dominated by high levels of promotional activity and lacklustre consumer demand, especially in Australia where there is little sign of any meaningful improvement in the near term,” they say. Which makes me wonder why all those big UK and US retail brands are clambering over themselves to open stores here. My point is, Bruce Walkley appeared on stage and talked about why the brand is doing so darned well here in Australia. When clearly it’s not. Hey, that’s okay. They may be in the throes of launching a fantastic turnaround

strategy and, as we know, major transformative plans take time. I’d like to hear more about that. I imagine the Go Global audience would also like to hear about that.

“I feel like the ‘we’re doing really well’ presentations perpetuate the myth that Australia is just a big ol’ version of New Zealand. It really isn’t, but there are some great ways to tackle Oz and come out victorious”

I feel like the “we’re doing really well” presentations perpetuate the myth that Australia is just a big ol’ version of New Zealand. It really isn’t, but there are some great ways to tackle Oz and come out victorious. Midway through the conference, attendees went off to country-specific breakout sessions. The China room was heaving with action. I’d say 80% of the conference went to that session. We had 10 people in the Australia room. In fact, for fifteen minutes we wandered around lost, couldn’t even find the Australia room. The Sky

City staff couldn’t find it. Eventually we discovered it through a side door, off the China room. The door didn’t close properly. We joked this was the first time exporters had to come to Australia via China. Usually it’s the other way round. Last week, to further assist New Zealand exporters to Australia, NZTE launched their Beachheads programme here. As part of the promotional road show, an article came out in Stuff with the headline Australia tough for Kiwi businesses. Two of the advisors, John Mumm and David Clarke, both with very impressive Australian backgrounds reiterated that Australia needs a focused approach, strong local networks (not too dissimilar to what you’d need in Asia) and a move away from a product-centric strategy. Right then, I must end this on a positive note so here it is: • Use the many Kiwi business connections available to you in Australia. • Come over here totally informed and brilliantly positioned. • Pack your bags for a long stay. You need to be in it to win it.

Bella Katz is an Australia-based brand and marketing consultant, and regularly advises New Zealand companies on how best to position in Australia. She specialises in marketing for the business to business sector. bella@bellakatz.com.au, LinkedIn +61 (0) 410 400 657 bella@bellakatz.com.au Bella on LinkedIn  www.bellakatz.com.au BusinessPlus

Free Trade with Taiwan superb opportunity Business people are rating the free trade agreement with Taiwan the best FTA ever. The ANZTEC agreement as its known offers New Zealand businesses a unique, high profile and a first mover advantage in Taiwan. Now is the time to take advantage of it. New Zealand is the only OECD country with such a comprehensive, high quality, and rapidly implemented trade agreement with Chinese Taipei. Since it came into force on 1 December last year most tariffs have already been eliminated including: • Most dairy • Apples, apricots, peaches, plums

• Cherries • Wine • Lobsters • Venison Beef tariffs have halved and from January 1 next year will be tariff free. Next year kiwifruit will be down to a 5% tariff and duty free a year later. Under the agreement New Zealand will have duty free access to Taipei (24 million affluent consumers) for most goods including fresh foods and dairy within the next two or three years if not sooner! Trade mission underway

Arrangements are underway for a Trade Mission to Taiwan and Hongkong from July 12 for one week only being

organised by a partnership of Export NZ and NZ Trade & Enterprise. This is a government mission to all intents and purposes, and the first comprehensive mission there since the signing of the ANZTEC FTA. The mission is to be led by Charles Finny on behalf of the government, Sir Ken Stevens and Business NZ CEO Phil O’Reilly. NZTE will be managing the programme on the ground in Taiwan in its entirety. Register now go to the website at www.nztrademission.co.nz for all the arrangements (and another planned for early September to Indonesia).

The US future is for free trade A recent poll shows most Americans, especially the young, are in favour of more trade liberalisation, including the Trans Pacific Partnership Free Trade Agreement. In a Gallup poll respondents were asked in February this year whether they consider trade more “an opportunity for economic growth through exports,” or more “a threat to the economy from foreign imports”? The result was a 54-38 split in favour of more open trade, with people more likely to look for exports as a source of growth rather than imports as a reason to worry. Progressive Economy, a not for profit research organisation, advises trade polls like this should be analyzed carefully as questions that are nearly identical on substance, but with different wording, can yield starkly different answers. For instance “International trade” usually gets happier results than “globalization;” “free trade agreements” beat “elimination of barriers to imports,” ) “The Gallup survey, though, has the virtue of having asked the same question over a long period of time February’s was the 12th iteration since 1992, the organisation reports. A German poll done by the Pew Center with Germany’s Bertelsmann Foundation, adds depth to the finding. It looked at attitudes in America and

BusinessPlus

By the numbers

In favour of trade liberalisation: 18-29 year olds: 67% Total population: 53% Over 50: 45% * Pew Research Center, polling done Feb. 27 - March 2, 2014.

Germany toward the Trans-Atlantic Economic Partnership (“T-TIP,” the proposed free trade area joining the U.S. with the 28-member European Union) with insights too on the 12-country Trans-Pacific Partnership. The poll covered American and German views of trade, attitudes toward economic relationships with China, regulatory systems in privacy and food safety, and more, and highlighted other aspects of American opinion, namely: Young people seem to be responding with enthusiasm to the European and Pacific agreements. 67% of Americans under 30 like the US –European idea and 65% also agree the TPP would be good for the country. Only 45% above 50 years of age view the European deal as a good thing with 49% of them favouring the TPP. Younger people may simply be more “pro-trade” whenever they’re polled, feeling resilient, able to shift plans, and more excited than worried by the prospect of change. Asking a slightly different question in 2007, for example - “are agreements

like NAFTA and the WTO are good for the United States?” - Pew found a 63-22 favorable split among Americans under 30, offset by a 27-49 negative vote from Americans over 65. “The Trans-Atlantic Trade & Investment Partnership is a good thing for the United States.” Democrats 60% Republicans 44% Independents 53% “The Trans-Pacific Partnership is a good thing for the United States.” Democrats 59% Republicans 49% Independents 56% It appears demographic trends are strengthening Democratic support for trade and trade agreements with earlier Pew polls finding Hispanic and Asian-Americans more favourable to trade agreements than the public as a whole. With these ethnic groups growing as a share of population, and along with young people tilting toward Democratic party identification, these trends may be making the Democratic electorate structurally more favourable to trade agreements. The Gallup poll is at: http:// www.gallup.com/poll/167516/ americans-remain-positiveforeign-trade.aspx

MEMBER NOTICEBOARD

Gallagher security wins double in the US For the second year in a row, Gallagher Security of Hamilton has won the Govies Government Security Award in the US. The award was for its Integrated Perimeter Security Solution with the unique ability to incorporate perimeter security seamlessly into access control via video and related systems. The system eliminates the need for additional layers of command and control software Award-winning Integrated Perimeter Security Solution. and supports Gallagher’s President of Sales Personal Identification - Security North Verification (PIV) product. America, Michael The PIV system was Collins, says: “This also an award winning once again proves our integrated solution is product in the US last a truly leading, oneyear at the Government Security News (GSN) of-a-kind security system not only in the 2013 Homeland Security Gallagher Vice President Security - North US but globally.” Awards. America, Michael Collins (r) receives the award for a perimeter security system. With its US Gallagher’s Vice

headquarters in Kansas City, Gallagher services security-critical sectors such as government, defence, correctional and financial institutions. Products specialise in both access control and perimeter protection. Gallagher invests 14% of revenue annually in research and development. On the other side of the Atlantic, Gallagher fencing technology is helping to keep animals safe in Ostrava Zoo (Czech Republic). The zoo uses Gallagher energizers in the enclosures for bears and African beasts of prey; and five energizers, 22 fence monitors and five alarm systems in a project for housing monkeys, chimpanzees and African red river hogs. Staff are immediately alerted if there is any interruption to the power supply or damage to the fence. The pavilion and outdoor enclosure projects are due for completion this year.

Log invention opens new markets and efficiently with minimal An exciting invention – a timber impact on neighbouring pole with a hollow core - saw properties. TTT Products win the 2013 New “To install conventional piling Zealand Engineering Excellence products can take up to 20 days, Award for Building and whereas the MultiPole piling Construction with their unique system can be completed in as TTT MultiPole. little as 2 days for the same job!” John Reelick, co-owner Mr Reelick said. of TTT Products developed “The export potential for the MultiPole with structural this product is huge, based engineer Mark Batchelar of mlb Consulting Engineers, and its on inquiries received from Australia, Korea, Canada and become invaluable in dealing the US, and Europe. “There with post-Canterbury earthquake is always talk about how we liquefaction concerns. TTT Products Ltd Directors James Sayers (left) John Reelick on the right should add value to our logs TTT Products in business for standing in front of a pile of TTT MultiPole Uglies before they leave New Zealand over 20 years is an innovative - TTT MultiPoles are a perfect timber pole manufacturer based in developed by TTT Products, leaving a example of how this can be done”. Tuakau; they’re not your average timber centre hole running the full length of The TTT MultiPole is so versatile it pole manufacturer. the pole. The pole’s strength is retained can also be used for building structures, “We’ve done many years of in the outer sapwood layers while full such as the Te Wharehou O Tuhoe experimenting, researching, and penetration of timber preservative can developing, and the most recent be impregnated from both internal and building in Taneatua, where they invention – the TTT MultiPole – has external faces, and with checking and were used for structural columns, been in the pipeline for about five splitting greatly reduced. post-tensioned shear walls, and floor years” Mr Reelick said. In Christchurch TTT MultiPoles panels. Multi-storey buildings are also Its manufactured from radiata pine are used for ground improvement, a possibility and gaining wider attention logs with most of the heartwood deep-piling, and above-ground raft here and overseas. removed via a special drilling process foundations. They’re installed quickly Go to www.unilog.co.nz for more. BusinessPlus

& About Out &Out About 18th Annual OH&S Conference, Auckland

Post Budget Luncheon with Finance 10 Minister Bill English, Auckland 11

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16 4

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001 – Rob Seiga and Walter Tuakana [INEX] 002 – Mike Edmonds [Warmup NZ], Steve Setterfield [AHI Carrier] and Alan Reynolds [Kaurilands Skill Centre Trust] 003 – Rosemary Olwage [NZ Blood Services] and Philip Reynolds [The Difference] 004 – Beverley Pollard [Framework] and Glenda Delaney [ALSCO] 005 – Karen Lee-Muller [Pacific Steel Group] and John Shaw [Sharp Corporation of NZ] 006 – Elizabeth Lee [North Shore Hospice] and Arishma Highman[Rescare Homes Trust] 007 – Kim Poynton [Pak n Save Tauranga] and Sarah-Jane Burton [ Roche Products (NZ)] 008 – David Bodger [Gull NZ] and John Pascoe [Epro] 009 – Mike Hock and Damien Sauni [NHP] 010 – Paul Jarvie [EMA] and Andrew Stevens [Leighton Contractors] 011 – Angela Hill and Jo Verry [Competenz] 012 – Hayley Nithi, Vanita Patel and Vinod Naidu [Competenz] 013 – Phil Williams and Mark Powles [Competenz] 014 – John Lawton [Lawton Building], Frank Wells and George Corbett [Unitec] 015 – Bill Butler and Craig Garner [EMA] 016 – Julie Bryington and Billy Lo [City Parks Services]

001 – Tim Houltham, Vera Judzewitsch and Joe Rose [Fire Security Services] 002 – Trevor Nash, Rob Malone, Peter Ewing [Premier Insulation] 003 – Mary Chen and Bert Wong [Makita NZ] 004 – Shinead McGowan and Chris Timoti [Baycorp NZ] 005 – Robyn Webb [Pohlen Partners] and Toni Sherlock [MacQuarie Group] 006 – Emma Gordon [Pohlen Partners] and Simon Woolley [Hay Group] 007 – Odette Shearer [Pohlen Partners] and Shane Gorst [Make-a-Wish] 008 – Grant Lenim [Toll NZ] and Christine Fenner [Pohlen Partners] 009 – David Ballard and John Horwood [Gilmours]

MEMBER NOTICEBOARD By Mary MacKinven

Every boatie’s dream: hands-free boat launch and retrieval How does this sound trailer boaties? You guide your boat to touch the hydraulic rollers on the rear end of the trailer, press a button on a remote control and your boat automatically works its way up onto the trailer using powerful drive rollers connected to the trailer’s front-end. Then you hook the bowline onto the front end of the trailer Balex Marine managing director Paul Symes (l) and automatic and drive away. boat loader designer, Lex Bacon No wet feet. Not even another helping hand needed. Likewise, for launching, in reverse. No swinging around the ramp in rough weather, because launch and retrieval is so quick. Such a thing exists. The patent-pending Automatic Boat Loader (ABL) was launched by Tauranga company Balex Marine at the ‘Hutchwilco Boat Show’ in base unit of rollers and control box, Auckland last month. plus installation of around $3-500, Managing director Paul Symes says depending on the configuration. the result was beyond his expectations. The loader comes with two remotes Not only did Balex Marine manage to (one for the boat, one for on land) and deliver the commercialised design on a manual switch on the control box at time but they spoke to thousands of the vehicle end of the trailer. enthusiastic show visitors. The innovative mechanism is The show was also an opportunity demonstrated in a video on to do market research: Balex Marine www.BalexMarine.com asked questions about boat and trailer The ABL was designed by Lex use in a competition they ran. “The level of support was fantastic. We Bacon, realtor and long-time boatie. “I would see people struggling to get always thought the idea was good and out of the water, huge queues forming, 95% reinforced that it was innovative and often boats getting completely and had a place in the market.” stuck,” he says. “With enough power The price is $4,500-5,500 for a

to pull up to five tonnes of boat, the system operates quickly and smoothly in all weather conditions. “And because you’re not relying on gravity to pull the boat into the water, launching on the beach or on shallow ramps is effortless.” Experienced businessman Paul Symes, who founded steel detailing company 4D Global Group, joined Balex last year after spotting Mr Bacon’s novel product, to bring it to market. International patents are pending with the initial market focus on New Zealand, Australia and North America. A further international trend in Balex Marine’s favour is the banning of power loading at boat ramps: the ABL does not require boats to be powered onto trailers. Balex will also be exhibiting at the ‘Auckland on Water Boat Show’ in September and the ‘Fort Lauderdale International Boat Show’ in the US this November. The product will be on the market from October. In the meantime Balex Marine is keen to engage with interested resellers and installers. A capital injection is also needed to fully commercialise. New Zealand Trade and Enterprise, ExportNZ, EMA and other Priority One partners in the Bay of Plenty have been extremely helpful and easy to access, he says.

The Balex® Drive Rollers are customised for high friction drive and provide a non-damaging interface for your boat. With wireless remote control, the launch and retrieval process can be started, stopped, and paused at the touch of a button. BusinessPlus

SCHEDULE FREE for all EMA members | To register call AdviceLine on 0800 300 362 or email AdviceLine@ema.co.nz

Winter Briefings Schedule 2014 Auckland Day/Date

Time

Venue

Tues. 1st July

9.30am - 11.00am

Stamford Plaza, 26 Albert Street

AUCKLAND CITY

Tues. 1st July

2.00pm - 3.30pm

Waipuna Conference Centre, 58 Waipuna Road

MT WELLINGTON

Tues. 1st July

4.00pm - 5.30pm

Waipuna Conference Centre, 58 Waipuna Road

MT WELLINGTON

Wed. 2nd July

9.30am - 11.00am

Counties Inn, Rata Lounge, 17 Paerata Road

PUKEKOHE

Wed. 2nd July

3.00pm - 4.30pm

Waipuna Highbrook, Highbrook Drive

EAST TAMAKI

Thurs. 3rd July

2.00pm - 3.30pm

Ellerslie Events Centre, 80 Ascot Avenue

GREENLANE EAST

Thurs. 3rd July

4.00pm - 5.30pm

Ellerslie Events Centre, 80 Ascot Avenue

GREENLANE EAST

Fri. 4th July

9.30am - 11.00am

Lincoln Green, 159 Lincoln Rd

HENDERSON

Fri. 4th July

3.00pm - 4.30pm

EMA Room 2C, 159 Khyber Pass Road

GRAFTON

Mon. 7th July

7.30am - 9.00am

EMA Board Room, 159 Khyber Pass Road

GRAFTON

Mon. 7th July

11.00am - 12.30pm

Butterfly Creek, Tom Pearce Drive

MANGERE

Tue. 8th July

9.30am - 11.00am

North Harbour Stadium, ASB North, Gate A, Carpark A, Stadium Drive

ALBANY

Tue. 8th July

3.00pm - 4.30pm

Bruce Mason Centre, 1 The Promenade

TAKAPUNA

Northland Day/Date

Time

Venue

Weds. 9th July

3.00pm - 4.30pm

The Northerner, Corner North Road & Kohuhu Street

KAITAIA

Thurs. 10th July

9.30am - 10.30am

Scenic Circle Bay of Islands, Seaview Road

PAIHIA

Thurs. 10th July

1:30pm - 3:00pm

Kingsgate Hotel Whangarei, 9 Riverside Drive

WHANGAREI

Fri. 11th July

2.00pm - 3.00pm

Webinar

Waikato / BOP Day/Date

Time

Venue

Tues. 15th July

9.30am - 11.00am

East Bay REAP (Upstairs), Reap House, 21 Pyne Street

WHAKATANE

Tues. 15th July

3.00pm - 4.30pm

Huka Village, Huka Falls Road

TAUPO

Weds. 16th July

9.30am -11.00am

The Holiday Inn, Corner Froude & Tyron Streets

ROTORUA

Weds. 16th July

1.30pm - 3.00pm

Central North Island Kindergarten Association, 6 Glenshea Street

PUTARURU

Weds. 16th July

5.00pm - 6.30pm

Venue to be confirmed

OTOROHANGA

Thurs. 17th July

9.30am -11.00am

Kingsgate

HAMILTON

Thurs. 17th July

3.00pm - 4.30pm

Thames War Memorial Civic Centre, 200 Mary Street

THAMES

Fri. 18th July

9.30am - 11.00am

Sebel Trinity Wharf, 51 Dive Crescent

TAURANGA

Day/Date

Time

Venue

Mon. 21st July

2.00pm - 3.00pm

Webinar

Thurs. 24th July

9.30am - 11.00am

Titirangi Golf Club, Links Road

NEW LYNN

Thurs. 24th July

2.30pm - 4.00pm

Bruce Pulman Park, Teamsports Centre, Walters Road

PAPAKURA

Other

BusinessPlus

offers you a holistic look at your business and the training needs you have. Whether it be standard training or specialized, we can meet with you, discover your needs, and structure a training plan specifically for you.

JULY

EMA Alert

Contact Deborah Carruthers

deborah.carruthers@ema.co.nz Ph 09 367 0947 | Mob 021 636 799

www.ema.co.nz | learn@ema.co.nz

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