Coffee with Maria from The Tax Lady
"Why would IRD allow you to do this?"
This is the reaction of some of Maria Anderson's clients when they hear about how tax pooling can help with provisional tax payments for the first time.
Maria is one of the Directors at The Tax Lady in Upper Hutt, north of Wellington.
Their clients range from small businesses to sole traders through to construction workers. Fluctuating cashflow comes with the territory, and Flexitax® gives them more time to their provisional tax and when it suits their cashflow.
'Pub meetings' with friends and using accounting software without a chartered accountant examining it for gaps can leave a business in a vulnerable place. These stories are what drives Maria to help her clients understand how the tax regime works so they can comprehend the risk of missing or underpaying their tax to IRD.
She believes that if they know what legislation says in plain English and understand the options available through tax pooling well enough, they can make an informed decision.
"Once you explain it, it all falls into place."
IRD agrees to stop contacting clients directly
Accountants have a fundamental role to play in the tax system and IRD is putting measures in place to limit direct contact with their clients.
These are the words of IRD commissioner Naomi Ferguson.
Her announcement – made during her address at the annual Chartered Accountants Australia and New Zealand (CA ANZ) Tax Conference in Auckland – comes as a response to concerns raised in a survey by tax agents that they are being pushed out and undermined.
The commissioner was quick to allay those fears, reminding accountants of the important role they play in maintaining the trust, confidence and integrity of the tax system. She added they will continue to do so as IRD forges ahead with Business Transformation.
In terms of the unintended issues stemming from IRD contacting clients directly, she said more than 70 processes involving interactions with taxpayers have been adjusted since issues were brought to its attention.
IRD will also invert the system so that the default position ensures tax agents will receive correspondence for any taxpayers to which they are linked.
A very timely announcement
Her announcement is welcome news for many accountants.
It is also timely, coming directly after TMNZ chief executive Chris Cunniffe presented at the conference the results of the annual Satisfaction with IR Survey.
The survey – commissioned by TMNZ and CA ANZ, and in its ninth year – found that nearly three-quarters of members working in public practice had clients who were contacted directly by IRD in the past six months. This is up from 66 percent the previous year.
Agents were very vocal in voicing their displeasure about this.
As a result of IRD bypassing them and contacting more of their clients directly, they were starting to feel undermined. Some were also expressing concern that the department is deliberately designing the tax system to phase them out.
Feedback in the survey is consistent with what TMNZ and CA ANZ are hearing from accountants at their respective roadshows.
However, following the IRD commissioner’s announcement, tax agents will now be able to rest easy.
Satisfaction with IR Survey: Other findings
The Satisfaction with IR Survey asks CA ANZ members in
public practice and business for their views on Business Transformation and
interactions with IRD.
Below are some of the other key findings from this year’s survey.
Members’ experiences contacting IRD
Chartered accountants’ overall satisfaction with IRD dropped for the fourth year running. It now sits at 66 percent, down sharply from 78 percent in 2018.
The decline is steepest among accountants in public practice.
That's due to the difficulty they face when trying to find the right person to speak to when phoning IRD (declined 11 percentage points) and the accuracy of the department’s processing (declined 15 percentage points).
The challenges experienced in these areas can be attributable to the release of phase three of Business Transformation earlier this year.
Polarising views on Business Transformation phase three
Members in public practice were less favourable about this
release compared to members in the corporate, public and not-for-profit sectors
– a reflection of their experiences of phase one where they were again the
hardest hit.
Difficulty finding things on the website, the speed of IRD’s responses and processing times, and getting known errors fixed are the source of their frustration with phase three.
But those who feel the release has gone well believe the website is easy to use and contains all the information they require in one place.
Forty percent of members believe IRD is prepared to face the
challenges of the next 12 months but feel these could be better addressed with
more honest communication, staff training and wider engagement with taxpayers,
software providers and accountants.
Members say that general information in tax information bulletins, rulings, brochures and tax alerts have all improved this year.
TMNZ and CA ANZ share the full survey results with IRD. You can view them here.
About the Satisfaction with IR Survey
TMNZ and CA ANZ have been conducting the Satisfaction with IR Survey since 2011.
Five great accounting tips for small and medium businesses
Getting the right small business accounting advice is vital for the success and growth of your small business. Here are five essential tips to help organise accounting for your small business.
Keep a record of tax deadlines
Knowing when business taxes are due throughout the financial year is crucial for the health of your small business. If you miss an important deadline, you could receive a costly penalty. In New Zealand, staying on top of GST returns and paying provisional tax on time is especially important.
The IRD has resources available to remind you of these important dates. You can also check the TMNZ Tax Dates Calendar to see your terminal tax and provisional tax dates. It is important to be proactive about tracking these yearly deadlines to meet your ongoing tax obligations.
Be diligent and stay on top of invoicing
A common challenge when accounting for small businesses is keeping track of invoices. Courteous clients will provide quick payment for your services rendered. Unfortunately, fair and steady returns are not always reality, which affects the cash flow of your business.
Be polite but assertive when invoicing. Send invoices as soon as possible after a job is complete. Be clear in your expectations regarding how clients can provide payment, and by which date. Arrange standard follow-up procedures if you do not hear back or do not receive payment after a certain period.
Always remember that you and your employees work hard to provide quality goods and impeccable services to your clients. You have every right to expect clients to respect that effort by meeting their payment obligations as quickly as possible.
Make the most of automated accounting software
Automated accounting software can be a lifesaver for small businesses. Accounting software covers many of the fundamentals of running a small business. This software helps keep track of expenses and automatically generates forms and reports about your business. This lightens the load of your day-to-day accounting practices.
Tax Management NZ is integrated with accounting software such as Tax Lab and APS to make it that much easier and convenient to use tax pooling if a payment has been missed. To get the most out of accounting software, we would recommend a chartered accountant look over the specifics of your business for any gaps that may have inadvertently be over-looked.
Know your limits and hire a professional when necessary
Just because you have a great idea for a business, doesn’t necessarily mean you have the skills and knowledge to do small business accounting. Many small to medium business owners try to tackle bookkeeping on their own to save costs. But in the end, making errors or filing expenses incorrectly could prove costlier than hiring a professional.
Maintain a relationship with a chartered accountant who can help keep your books tidy. A reliable accountant can help you arrange tax pooling for your business. Tax pooling provides you with more control and flexibility to manage tax payments and can save your business money from late payment penalties and use of money interest.
You may only need your accountant’s services several times a year. However, having a professional on hand for accounting advice gives you precious peace of mind that your accounting is in order.
Don’t get caught out by unexpected costs
The longer your business is in operation, the more likely you are to face a large, unexpected cost. For example, you may find yourself needing to repair or upgrade your business’ equipment. This is costly, but unavoidable for your business to operate.
An unexpected cost could even come in the form of an opportunity to grow your business, such as a market gap that you could fill perfectly. Taking advantage of such opportunities requires up-front investment.
In either case, expect the unexpected and put money aside to cover unforeseen operational costs. This is sound advice for any small business. Doing so will save you the headache of scrambling to cover a significant bill or missing out on the chance to grow your business.
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Tax Management NZ is trusted by thousands of Kiwi small and medium-sized businesses. We are the leading tax pooling provider in New Zealand and work closely with IRD to ensure our services are secure and reliable. Get in touch with our team today for tax pooling and provisional tax payment advice.
Coffee with Ann from Q2 Accountants
Have you ever wanted to sit down with an accountant and discuss topics related to business and provisional tax in depth? We were given the opportunity to do just that with Ann Cooper Smith, the Founder & Chief Executive of Q2 Accountants.
If you don't know who Ann is, she is a chartered accountant with 30 years experience in the public sector. The combination of her personal experience and passion for seeing businesses thrive are what give her a personalised approach to the questions we asked. A handful of those questions are below:
- What are Q2 trying to achieve for its customers?
- What should a business look for in an accountant?
- How does tax pooling provide solutions for your clients?
You will hear how Ann has learned how to use tax pooling creatively for her clients so they can further invest in their businesses while paying their provisional tax.
Take some time today to watch this video as it will give you some framework on how success can be achieved through smart planning.