PONSONBY PROFESSIONALS

Q: I am opening a café with a business partner and have been asked to act as a guarantor for the lease. Should I agree?

A: The basic rule is never agree to anything until you fully understand your obligations under the agreement that you are signing.

When you act as a guarantor, you are promising to act as a back-up for the person signing the lease agreement. If that person stops paying rent or breaks any other terms of the lease agreement, the landlord has the right to chase the guarantor for money owed, including fees and interest. Your obligations as a guarantor for that lease agreement will usually be contained in the deed of lease. You should check both documents, by signing the agreement to lease you are also committing to the deed of lease.

I would expect that both you and your business partner signing the lease agreement with the landlord as guarantor.

Co-guarantors have a right of contribution against each other, and a guarantor if called upon, has a right of subrogation against the principal, but these rights are not that useful if the business has failed and your co-guarantor is penniless.

such as sickness or death of your business partner or business interruption?

You should consider that if the business failed then what is the total liability you may have under the lease. This is the amount of lease and OPEX due for the remaining term of the lease. If the business failed, where would the money come from to cover these costs? Do you have other capital or income available?

Can you insure against events that could cause business failure

You should ask your solicitor to look at the agreement to lease and deed of lease that you are signing, so they can fully explain the extent of your obligations under it and the consequences of being a guarantor. They may be able to suggest ways in which you can limit your liability or negotiate better terms with your prospective landlord. (MICHAEL HEMPHILL)  PN

METROLAW, 169a Ponsonby Road, T: 09 929 0800, www.metrolaw.co.nz

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AUCKLAND CENTRAL ELECTION CANDIDATES’ DEBATE Hosted by: Ponsonby News Editor Martin Leach

Chaired by: John Elliott

Sunday 9 August 4pm-6pm

FREEMAN’S BAY SCHOOL 95 Wellington Street, Freemans Bay

For many business owners, deciding to sell their business is one of the most difficult decisions which they will have to make.

Particularly so if they started the business, or have owned it for a long time. It has become their baby. They have lived with it 24/7 for a long time.

Just because the doors are closed, and the lights are off, it doesn’t mean that the owner has turned off as well. Thinking, planning, problem solving, designing, sourcing new products, investigating new opportunities, pricing, budgeting, marketing, advertising; these thoughts and ideas, sorting, sifting, swirling in their mind while resting, walking, jogging, or gardening.

Then there comes a time to let it go; perhaps planned from the start, or forced upon them due to age, ill-health or family circumstances. Some business owners I have come across have a three to five year plan. They will start a business with the intention of selling within three to five years. One client I had sold three similar businesses within a 12 year period. He had devised a successful formula. Despite the restraint of trade provisions when he sold each business, he found he could circumvent, and use the same skills and processes plus many of the same customers (department stores) but in a totally different market segment. He initially specialised in import/wholesale businesses moving from consumer electronics, to housewares to digital equipment.

Whatever the reason for the decision, once it has been made, the process is not swift. The average business takes around three months to sell. Some may sell in three weeks, others three years.

The business needs to be properly prepared, priced and presented to the market. A good business broker should be able to assist and advise each step of the way, casting the net as wide as possible to attract the right buyer.

DAVID WELLS, Senior Business Broker, NAI Harcourts, M: 027 436 1465, E david.wells@naiharcourts.co.nz David Wells

T: 378 9560 M: 0274 746 507 E: Phillipa@hotpropertyrentals.co.nz 1/1 Franklin Road, Ponsonby www.hotpropertyrentals.co.nz “TAKE THE STRESS OUT OF BEING A LANDLORD – CALL US”

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Here they come! The 70-plus

“There are changes about to happen in the way we live our lives in later years, the likes of which we have never seen in New Zealand before,” says authorised financial advisor (AFA), Maurice Mehlhopt.

Maurice has shared some insightful and compelling advice, gained from over 40 years experience in business and finance with the Ponsonby News. He describes an older generation who are no longer defined by the number of their years but are increasingly re-defining what it is to be over 70.

How attitudes to retirement and retirement finances have changed Past generations saved hard, went without luxuries, lived skimpily of town to the other, so by

in retirement and only died happy (usually living with one of their children), when as much wealth as possible was passed on to the next generation. If this philosophy still existed today there would soon be some very rich rellies indeed. This is because over $100 billion in real estate value is about to be released as older folk, who own homes, pass on.

It will be the biggest exchange of wealth this country has ever seen, it will happen over a fairly short number of years, and it will have a marked effect on the economy.

So, are the benefactors grinning already with plans to book first -class air fares or luxury holidays? No, they’re not, and that’s because attitudes to inheritance have changed dramatically in recent years. No longer do those who are over 70-years-old believe they should go without so they can give everything to their family. The Peter Snell ‘third age’ has arrived. Oldies now want to be out doing on to you so quickly, but the good news is I often find that the next

stuff; travelling, eating out, enjoying life to the full and then whatever is left over will be the inheritance.

Should you stay or should you go? That old idea of selling up to release some cash then living with family is no longer happening as much. Even the most loving families tell me that the thought of mum and dad moving in with them is just behind a considerable amount of wealth to be passed on.

not where it is at anymore. Likewise, parents want their own space and don’t want to be live-in babysitters or groundstaff.

half of all those over 75-years-old have very little cash left (even though up to 80% of them will own a home). Many will ‘sell down’, move to another part of town, or a new town to release some money and while this does not always work for various reasons it is still the most popular fund provider. Moving to a new town for instance only works if you are in a biggish city like Auckland. Smaller towns tend not to vary much in dollar value from one side the time you pay agent’s fees and removal costs there may not be too much left.

Some will choose to borrow from their bank if they have income to support a facility while an increasing number of people will take out a ‘reverse mortgage’. This much maligned product will be the answer for many who wish to stay in their home, but enjoy the ‘third age’.

While many try to devalue this type of borrowing, many thousands of loans have been activated throughout New Zealand over the last 10 years and clients love them.

I have often read articles criticising this type of loan but I have never had complaints from a client with a reverse mortgage. They are happily enjoying the new life a loan like this provides. Not to mention there can be benefits of using some funds this way before you end up in care.

So, there you are next generation! Nowhere near as much of that $100 billion is going to be passed generation are okay with this. Children are increasingly encouraging their parents to enjoy the retirement they have earned by initiating the conversation about home equity release.

In most cases there is ample equity for parents to enjoy the ‘third age’ - and for family to enjoy that time with them, while still leaving So where will the money come from to enjoy this ‘third age’? About

Best wealth management in older age is necessary to ensure the best use of that $100 billion windfall. I specialise in providing support and financial options to retirees who may be wanting to do more with their retirement years but struggle to do so. If you want to maintain your lifestyle it’s important to know what your choices are. Sometimes all it takes is a chat with someone who understands.

Do you have a copy of your employment agreement? These are two very common questions we ask our clients at CAB when we get a query about employment issues. And as you might imagine we are getting a high number of employment queries at the present time.

If you are an employer you will be aware that New Zealand employment law requires all employees to have a written signed agreement and a copy of that signed agreement.

If you are an employee and can’t find your copy your employer can provide you with a copy. We do tell people that employers can be fined if they don’t get you to sign an agreement, but not to worry, the law provides basic terms and conditions which an employer cannot contract out of, such as paying the minimum wage, or annual leave provisions. And maybe you have an agreement that was not signed - that can still be held to be a valid agreement.

Redundancy is an issue that has had much airplay in the media in these uncertain times and we are getting enquiries from both employers and employees about this process. This is one reason why having your employment agreement to hand is important. In New Zealand there is no requirement for an employer to pay redundancy compensation. Many people are unaware of this.

Therefore if an employment agreement does not mention redundancy compensation, there is no requirement to pay this. If there is a clause in the agreement, it will probably also state the amount of the compensation.

However, redundancy is part of a restructuring process and employers must follow this process, even during this period of recovery from the Covid-19 pandemic. Employers and employees must discuss in “good faith” the implications of the pandemic on their working arrangements. Before making employees redundant they must still follow a fair process.

Employers and employees may be considering all sorts of changes that involve impacts on the continuity of employee’s work, such as changes to job descriptions, reducing hours of work or, finally where no alternative arrangements can be found, redundancy may be considered. These changes must be discussed in good faith, and use agreed consultation processes. We have had quite a few employers contacting us about the process they need to follow. Failure to follow this, is a breach of the employment contract.

Employers must write to an affected employee, which must include:

the notice period (which should be the same as what it says in their employment agreement)

the last day of employment whether there is compensation and how much.

In addition, employers should offer the redundant employee support; for example:

counselling

help with updating or developing their CV

interview skills training

other training that might improve the employee’s chances of getting a new job and career advice.

The words “good faith” and “fair” and “reasonable” are relevant to all normal employment obligations and as stated above, apply regardless of the Covid-19 pandemic effect.

We encourage our employer clients to follow the process as set out and seek legal help if they are uncertain. And we encourage our employee clients to seek help from any support networks they have. If they are on a collective agreement and a member of a trade union, that is the best place to start. Otherwise, we can assist people to take steps as to how to progress this.

Employment New Zealand, part of the Ministry of Business Innovation and Employment has a very good hotline, which we can call with clients on hand. This is available to the general public – 0800 20 90 20

If people have to take a dispute further, there is free mediation available through Employment New Zealand for employers and employees. We all wish that issues are resolved by discussion but if this does not resolve the matter, the Employment Relations Authority is the next step for employment disputes.

We might not be in lock down now, but we are still being affected by the pandemic. We can do well to remember some of the attributes we as a society were asking of ourselves and others from that time as we move forward even in the employment relationship - Kia atawhai - Be kind!  PN

Lesley Bradley, manager of Citizens Advice Bureau, 510 Richmond Road, T: 09 376 0392; www.ponsonby@cab.org.nz

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Logan Granger: Tax – time for change

Tax changes in recent years, at least as they have affected the typical SME and SME owners, have been largely tinkering, except perhaps in respect of tightening up on rules aimed at property speculation.

Now is the time when we need to be incentivising and assisting those in our communities who have ideas, skills, and the willingness to take calculated business risks. These are the people that we want to encourage to start a business or expand or improve their existing one: to employ that extra person, start a new product line, enter a new market, invest in new technology, undertake some research and development, and ultimately grow our cake - in other words, increase the wealth of this country. back in families’ pockets. Some countries operate an elective tax system where couples can choose to be taxed as a couple rather than as individuals. In other words, they file a combined or ‘joint’ income tax return and often end up paying less tax in total due to the way personal marginal tax rates work, and the ‘averaging’ effect that filing as a couple achieves in many cases. One could make a rational argument that perhaps that taxing option should always have been available in New Zealand given the central importance of the family unit.

Tax has a role in helping grow a bigger cake, so below are some thoughts;

1. Re-indexation of the tax thresholds in terms of the income figures at which tax rates start to apply, at least based on CPI or average income movements. This hasn’t been done since October 2010 – ten years ago!

Backdate to 1 April 2020.

2. Big increase in small asset write-off deductions, and simplify the rules current temporary (one year) increase to $5,000 finishes, should be at least $10,000. Perhaps have a deduction allowed for up to $20,000 of new assets each year – similar to the legal expense deduction rule which allows up to $10,000 of deduction each year. Backdate to 1 April 2020.

3. Depreciation loading on new assets (with the exception of buildings) of 50%, for the current and future income years. I believe it is time to adopt this approach in New Zealand. Such an approach I think would reflect the reality of many or perhaps most family units operate. This was the view of Peter Dunne, former minister of revenue. In fact he had a bill before parliament which proposed a tax credit for couples with children, which was designed to achieve something along the lines of “a family being taxed on its ‘family income’, rather than each individual being taxed on their individual income. Mr Dunne’s bill passed its first reading in 2010 and made

around how these apply. The $1,000 threshold, which will apply once the it to select committee but then made it no further, and then lapsed in 2017.

One of the hurdles identified in respect of that bill at the time was that supposedly under the Bill of Rights Act such a law would discriminate against those not in a relationship with children. Really? Please forgive my ignorance – I’m not a lawyer and I’m certainly no expert on the Bill of Rights, however to a lay person is that really “discrimination?” If so, is Working For Families also discrimination since it is in part based on the number of children you have – the same issue raised in relation to Mr Dunne’s bill?

4. 150% deduction allowed on R&D expenditure which results in New Zealand owned IP.

5. Allow couples to file joint tax returns if they choose.

Allowing couples to file joint tax returns if they choose contributing communities are built on. It is hard to argue with this. It’s time our income tax system was changed to reflect this, and to put more money Putting that aside, I can think of no good reason why a family with a single income earner earning $100,000 should pay significantly more tax than the same family with two income earners earning $50,000 each. Families with one primary income earner are being overtaxed. Now is the perfect time to fix that, put more money in families pockets, and have the tax laws more accurately

The family ‘unit’ is perhaps the foundation that safe and healthy and reflecting how many families operate. (LOGAN GRANGER)  PN

Disclaimer – While all care has been taken, Johnston Associates Chartered Accountants Ltd and its staff accept no liability for the content of this article; always see your professional advisor before taking any action that you are unsure about.

JOHNSTON ASSOCIATES, 202 Ponsonby Road, T: 09 361 6701, www.jacal.co.nz

For the last sixteen years I have been teaching a financial planning module to the year 10 students at Mount Albert entitled Money $kills.

Essentially this is about goal setting and budgeting in relation to what 14-year-olds consider important. The oneyear goals were generally around purchasing a device, e.g. iPhone, tablet or a personal computer. Assuming a cost of $500 to $1000, the planning process required students to determine how much income was required in order to save sufficiently to purchase the item at the end of the year.

Using the ‘Bank of Mum and/ Dad’ was not an option; the students had to determine what sources of income were available to them. Ideas for work came quickly: lawn mowing, stocking supermarket shelves, gardening, car washing, window washing, lawn keeping and dog walking; but the best source was the work they could now do as 14-year-olds, but not as 13-year-olds, namely, babysitting at $10- $15/hour.

In order to save $1,000 per annum ($20/week) a student would need to earn at least $30 - $40/week so that they could both spend $10 - $20/week and save $20/week. Assuming an hourly rate of $10/ hour, four hours of work (i.e. one night’s babysitting) would produce the required $40.

The same students, when asked what their three-year goal was, were almost unanimous: a motor vehicle for independence and convenience. This is probably not what the cycling and public transport lobby would want to hear! Assuming this motor vehicle has a purchase price of $3,000, the plan above would produce the required sum at the end of three years; and by continuing to work in paid employment there would be sufficient weekly to cover the running costs of petrol, oil, registration, warrant of fitness, insurance and maintenance. If a student wanted to spend more than $3,000 on their first motor vehicle, more paid work would be required to generate the necessary weekly savings.

The weekly savings would be directed into an interest-bearing bank account rather than other investment alternatives due to the need for liquidity and certainty.

I also talked about the benefits of KiwiSaver, once they left school, as a means of funding home ownership and, later, retirement. The role of education was also stressed, in that it provided the platform to create economic choice and financial freedom through increasing the chances available to earn higher income.

This year the Ministry of Education has announced the introduction of a new NCEA course at levels one and two around financial literacy. I hope this course will be mandatory to ensure all school leavers are well equipped and prepared to ensure their future financial investments.

ONEPLAN, T: 0800 1plan4u, www.oneplan.co.nz

0800 1PLAN4U or 09 309 3680

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