PONSONBY PROFESSIONALS

To our clients and all Ponsonby News readers, we wish you a healthy and prosperous 2021 and we look forward to working with you over the next 12 months as we embark on a year focused on business recovery, restructure, and contingency and continuity planning.

For most of us seeing the end of 2020 was a joyous occasion worthy of a celebration like no other and we hope you celebrated in style surrounded by your loved ones. As we welcome in 2021, we first must reflect on the year that was; a year confronted by many challenges which have had an enormous impact on our business and personal lives.

So what did we learn from this and how can we be better prepared for any future challenges? One of the first things we learn in ‘Accounting 101’ is the importance of cash flow. Cash is King. And that today is more relevant than ever. Poor cash flow planning was the most common issue we came across during 2020.

Cash flow planning is best practice in any business and critical to survival and growth. Setting cash flow targets and regularly monitoring your actual cash flow against your forecast will enable you to predict large cash outflows and respond to changes in your business. Inadequate cash flow is a symptom of management problems in a business, NOT the cause. Helping our clients look ahead with confidence and putting in place basic cash flow maximisation strategies is core to our purpose as accountants.

Why is Cash flow Management so important? • Assists with bank lending requirements

• Identifies ways to avoid late payment penalties and interest from creditors

• Improves communication and relationships with your financiers and suppliers

• Gives you an understanding of cash and liquidity for better decision making

• Helps you understand the key cash flow drivers and the cash conversion cycle in your business

• Enables you to predict and plan for large cash outflows

• Teaches you how to monitor your actual cash flow against forecast in your accounting or reporting software

• Provides peace of mind that your cash flow needs are known and properly funded

• Improves business processes that maximise cash flow, profit, and business value

• Drives your business to achieve your goals in a controlled and managed way

• Assists in tax planning

• Encourages business growth, continuity and success Having your cash flow management sorted is one thing but does your business have a continuity plan? If you didn’t have one before March 2020, I am sure you have one now, or at the very least it has been added to your to-do list. Having a business continuity plan may not be high up your priority list, but its importance when disaster strikes, such as a global pandemic, is vital to whether your business sinks or swims. Having a plan in place improves the likelihood that your business will survive.

Having a business continuity plan helps • build business resilience

• outline the things you should consider now to minimise the impact on your business

• maximise opportunities to preserve your cash flow and profitability

• create a roadmap for dealing with employment issues and identify key staff

• clarify a process for looking after your customers and preserving income from them

• explore all options to pivot your business strategy in challenging times

• identify worst-case scenarios and plan to minimise risk

• preserve the value of your assets and your wealth

• reassurance that you’ve done all you can to minimise risk CONTINUED ON PAGE 79

What’s in-store for 2021? Tax Rate Changes With the new ‘Income Tax Rate and Other Amendments Bill’ about to come into effect (1 April 2021), we draw your attention to these tax updates. One change is a new 39% tax rate for individuals earning an annual income upwards of $180,000. To put that into perspective; an individual earning $250,000 p.a. would pay an extra $4,200 in tax per year; an individual earning $500,000 p.a. would pay an extra $19,200 in tax per year.

The Bill also includes additional tax rate changes to PAYE and secondary tax rates, fringe benefit tax, resident withholding tax on interest, employer’s superannuation contribution tax, residential land withholding tax, retirement savings contribution tax and the Maori Authority distribution non-declaration rate. Watch this space.

Small Business Cash flow (Loan) Scheme (SBCS) If you have not already applied for the government interest-free cash flow loan, good news, you still can. The government recently announced changes to the SBCS. These changes align the eligibility criteria with the government’s recent decision to extend the scheme’s application period until the end of 2023. In addition to these changes, the government have updated the scheme to include lending to new SMEs, a longer interest-free period, and those who have already repaid the loan can now reapply for additional funding. These changes will take place from early February 2021.

For more information on above, please contact us at Johnston Associates. (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.

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Trusts & Wills | Business & Commercial | Property

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DAVENPORTS LAW: THE NEW TRUSTS ACT IS NOW IN FORCE

Does your trust comply?

The Trusts Act 2019 came into Under the new Act there is also an increased responsibility on force on the 30th of January, trustees to carry out their duties properly, and have greater bringing many new changes to Trust accountability to the beneficiaries. The new Act divides trustees’ law as we know it. The previous act duties into two broad types: mandatory duties which you cannot had been in place since 1956, and contract out of, and default duties that apply unless your trust deed over time had been interpreted by says otherwise. The mandatory duties include understanding the courts, which had amended the trust deed, acting in the best interests of the beneficiaries and letter of the law. The purpose of accounting to the beneficiaries. Tammy McLeod the new Act is to make trust law more accessible, by codifying the The default duties which can be modified include that the trustees law and making sure everyone can understand their responsibilities must act unanimously, that the trustees must invest trust assets and rights under the Act. prudently and that all trustees must hold core documents. “It is important to check your trust deed in light of the new Act to ensure “While the reasons why people set trusts up have changed over that the trustees are complying with the mandatory duties and to see the years, there are still very good reasons why trusts are still the if the default duties need to be modified”, says Tammy. most flexible asset owning structure we know”, says Tammy McLeod, Director and Trust Specialist at Davenports Law. “The most important The new Act extends the time period for trusts from 80 to 125 years. part is to ensure that it does the job you want it to. When setting up This has come about due to increasing life expectancies and people or reviewing a trust make sure that it will benefit those who you wish wanting to hold assets in trust beyond one or two generations. The to benefit, in the way that you intend.” new Act also makes it compulsory to remove incapacitated trustees. This is a welcome change to the previous system which, if the trust The biggest change in the new Act is that beneficiaries have deed was silent, required an application to the Court to remove an increased statutory rights. Beneficiaries aged 18 and over, have the incapacitated trustee. right to be notified that they are beneficiaries, and be told who the trustees are so they can hold them to account. They are also entitled While not part of the new Act, it is timely when reviewing your trust to copies of the trust deed and any variations, information about the structure, to consider your will and any wishes you may leave to assets and liabilities, trust financials and information regarding the the trustees of your trust. “Too often people sign these documents administration of the trust. and then don’t look at them again,” says Tammy. “It is important to constantly review wills and wishes to ensure that they still reflect your Sometimes the beneficiary class of a trust is much wider than what wishes and give good guidance to those you leave behind.” the person setting it up intended, which will mean more people will be able to access trust information. “It is so important to ensure that the Now that the new Act is in force, it is important to review existing trust beneficiaries of your trust are only the people who you want to benefit structures and accompanying documents to make sure they comply, from the trust. This is the change that is likely to create the greatest are doing the job you want them to, and are fit for purpose. concern for many trusts and it is important to get specialist legal advice if this concerns you”, says Tammy. “There may be options available to For specialist trust advice don’t hesitate to contact Tammy McLeod or amend your trust documents and set out more specifically your wishes the Trust team at Davenports Law by calling 09 883 4400 or visiting in relation to the beneficiaries.” www.davenportslaw.co.nz.  PN DAVENPORTS LAW, 331 Rosedale Road, Level 1, Building 2, Albany, T: 09 883 4400, www.davenportslaw.co.nz