When, as a farmer, you receive a higher-than-expected payout, it can have several tax implications: Increased Taxable Income : A higher payout means an increase in taxable income for the year. This could push you into a higher tax bracket, resulting in a higher overall tax liability. Provisional Tax Adjustments : You may need to adjust your provisional tax payments to reflect the increased income. This helps avoid underpayment penalties and ensures that you are paying the correct amount of tax throughout the year. Income Equalisation Scheme : You can use the Income Equalisation Scheme to smooth out your income over several years. By depositing some of the higher payout into the scheme, you can reduce your taxable income for the current year and withdraw the funds in a less profitable year, potentially lowering your overall tax burden. Deductions and Expenses : You should review your eligible deductions and expenses to ensure you are maximising your tax benefits. This includes costs related to farm development, maintenance, and other operational expenses. Tax Planning : It's essential that you engage in tax planning to manage the impact of higher payouts. Consulting with a tax advisor or accountant can help you develop strategies to minimise your tax liability and make the most of your increased income. Overall, a higher-than-expected payout can provide you with greater financial security and opportunities for growth and development. By planning and managing your finances effectively, you can make the most of this positive outcome.
Navigating the world of provisional tax can be daunting, but understanding the basics can help you manage your tax obligations more effectively. We provide some essential information on how provisional tax works and offer tips to avoid common pitfalls. What is provisional tax? Provisional tax is a way of paying your income tax in instalments throughout the year, rather than in a lump sum at the end of the year. This helps spread the tax load and avoid a large end-of-year tax bill. You are required to pay provisional tax if your residual income tax (RIT) from the previous year is more than $5,000. How does provisional tax work? Provisional tax is not a separate tax; it is part of your income tax. You pay it in instalments based on your estimated income for the current year. There are several methods to calculate your provisional tax: Standard Option : This method uses your previous year's RIT plus 5%. It is straightforward and works well if your income is steady or increasing. Estimation Option : Here, you estimate your income for the current year and calculate the tax based on that estimate. This option is useful if you expect your income to decrease. Ratio Option : This method is available if you are registered for GST and file returns monthly or two-monthly. It calculates provisional tax based on a ratio of your GST turnover. Accounting Income Method (AIM) : This option is suitable for small businesses using accounting software. It calculates provisional tax based on your actual income and expenses throughout the year. Payment dates The due dates for provisional tax payments depend on the method you choose and your balance date. Generally, payments are made in three instalments: 28 August, 15 January, and 7 May. For non-March balance date taxpayers, the payment dates are different. If you use the ratio option, you will make six instalments throughout the year. Avoiding common pitfalls Below are some of the common pitfalls that we see, and how to avoid them. Underestimating income : If you underestimate your income and underpay your provisional tax, you may be charged interest and penalties. It's important to make accurate estimates and adjust them if your income changes. Missing payment deadlines : Missing payment deadlines can result in interest charges and penalties. Set reminders and ensure you make payments on time. Ignoring changes in income : If your income fluctuates, consider using the AIM or ratio option to ensure your provisional tax payments reflect your actual income. Penalties and interest Inland Revenue (IRD) will charge interest on late or underpaid provisional tax. The interest charge is not a penalty, but a charge for the use of money, and is tax-deductible. Additionally, penalties may apply for late payments or underestimating your income. It's crucial to stay on top of your payments and make accurate estimates to avoid these charges. By making accurate estimates, keeping detailed records, and staying on top of payment deadlines, you can avoid common pitfalls and ensure a smooth tax experience. For more information reach out to us – we’re here to help.
One of our clients also tells us how our advisory services help him and his business. At Diprose Miller, we offer advisory accounting services that go beyond traditional accounting tasks like bookkeeping and tax preparation. Advisory accounting involves providing strategic advice and insights to help businesses grow, improve efficiency, and achieve their financial goals. Our advisory accountants work closely with clients to understand their unique challenges and opportunities, offering tailored solutions in various areas. Our advisory accounting services include: Financial GPS: We help businesses identify their long-term goals and provide a roadmap to achieve them. We offer regular updates and guidance to keep clients on track and ensure they reach their objectives. Business Strategy: We support business growth and profitability by working with clients to identify growth opportunities, develop strategic plans, and implement effective solutions. Smarter Farming: We specialise in helping farming and agricultural clients improve their performance and prepare for the future. Our tailored advice and solutions address the unique challenges faced by the agricultural sector. Cash Flow Management: We assist businesses in managing their cash flow to ensure they have the necessary funds to operate and grow. Performance Improvement: We identify areas for improvement and implement strategies to enhance business performance and profitability. Risk Management: We advise on risk mitigation strategies to protect the business from potential threats. By leveraging our expertise and experience, and by using the latest software and technology, we aim to support our clients in achieving their business objectives and navigating the complexities of the financial landscape. At Diprose Miller, we are committed to delivering exceptional advisory accounting services that drive success and growth for our clients. But don’t just take our word for it, see what our client, Pete Norris, Financial Advisor at Keystone Wealth, has to say about our services: We have been referring our clients to, and working with, Diprose Miller on our clients’ behalf for the last 3 or 4 years. Ed and his team have been providing fantastic service and just “made it easy”, which is high on my priority list, especially when they also “get it right first time”. I switched my business accounting to Diprose Miller when my previous accountant retired a couple of years ago. Switching accountants had been on my to-do list for several years but it always seemed like a low priority/high workload task. In reality, it was the opposite and I should have done it five years earlier! Ed has been brilliant to work with. Nothing is too difficult, and he is happy to source external information when required for those more complex situations (and some of mine get complex!). The whole team at Diprose Miller work cohesively, are responsive, and are helpful. They make it easy, which is exactly what I want and what I need. Ed and Diprose Miller handle the end-of-year accounts for many of our investment clients. They manage our accounts and GST for our Investment and Retirement Advice business, Keystone Wealth. They provided the structure and establishment advice, and manage the ongoing accounts, for my investment property company. They are providing advice (GST, currency, Xero, structure etc) and will assist me with establishing the right structure and ongoing accounting as we branch out into invoicing Australian suppliers for our investment education for Advisers programme that we are establishing. They will shortly be providing structure and accounting advice as we commence providing our investment portfolios to other investment advisers. They removed a massive barrier that used to exist in my planning stages of business growth. Now I just fire through my thinking and some questions and Ed calls me with what I need to know. It’s perfect! Pete Norris If you require any advice or help with your business, whatever type it may be, please give us a call or drop in to see us at the office.
You think that handling your accounts yourself will save you money, especially if your business seems straightforward, right? Wrong! In today's complicated financial world, having a good accountant is essential for businesses and individuals. Accountants do more than just handle numbers; they offer valuable advice and strategies that can save you a lot of money. Here's how your accountant can help you save: Tax efficiency: Accountants save you money by making sure you use all available tax deductions and credits. They understand New Zealand's tax laws and stay updated on any changes. By preparing your tax returns accurately and planning ahead, accountants help you pay less tax and avoid expensive penalties. Financial planning and budgeting: Accountants help you make detailed financial plans and budgets. They set realistic financial goals and create strategies to reach them. By tracking your income and expenses, accountants find ways to cut costs and improve your financial health. Good budgeting prevents overspending and ensures you have enough money for future investments or emergencies. Cash flow management: Managing cash flow is absolutely vital for any business's survival and growth. Accountants help you keep track of your cash flow, making sure you have enough money to meet your needs. They can predict future cash flow needs and suggest ways to improve your cash reserves. This proactive approach can prevent cash shortages and reduce the need for costly short-term loans. Cost control: Accountants look at your financial statements to find ways to cut costs. They can spot inefficiencies and suggest ways to save money, like renegotiating supplier contracts or streamlining operations. By closely monitoring your expenses, accountants help you stay profitable and avoid unnecessary spending. Compliance and risk management: Following financial regulations is essential to avoid fines and legal problems. Accountants make sure your financial practices follow the latest laws and standards. They also help you manage financial risks by spotting potential threats and creating strategies to deal with them. This proactive approach can save you money by preventing expensive compliance issues and financial losses. Business growth and expansion: For businesses wanting to grow, accountants are key in planning and carrying out expansion strategies. They help you see if new projects are financially possible, secure funding, and manage the money side of growing your business. By giving insights into market trends and financial performance, accountants help you make smart decisions that boost growth and profits. Accountants are more than just number crunchers; they are strategic partners who help you save money and reach your financial goals. They offer expertise in tax efficiency, financial planning and cost control, leading to significant savings and better financial health. Whether you're an individual or a business, having a skilled accountant is an investment that pays off in the long run.
Running a small business, being a sole trader, or working as a contractor has its own challenges and opportunities. One of the most important things to do is to keep a close eye on your expenses. Regularly checking your expenses can help you find ways to save money, work more efficiently, and increase your profits. So, what are some of the key points you should consider when reviewing your expenses. The first step is to track every dollar that goes in and out of your business. Use accounting software or a reliable bookkeeping system to record all transactions. This will give you a clear picture of your financial situation and help you spot any unnecessary or excessive spending. Organise your expenses into categories like rent, utilities, salaries, marketing, and supplies. This makes it easier to see where your money is going and identify areas where you might be overspending. By categorising your expenses, you can also compare your spending against industry benchmarks and make better decisions. Fixed costs, like rent and salaries, stay the same no matter how much business you do. Variable costs, like supplies, change with your level of production or sales. Analysing both types of costs can help you understand your cost structure and find ways to save money. For example, you might be able to negotiate lower rent or find cheaper suppliers. Many businesses subscribe to services and memberships that may no longer be necessary or beneficial. Review all your subscriptions and memberships regularly to make sure you are getting value for your money. Cancel any that are not essential or that you can replace with cheaper alternatives. Take the time to review your contracts with suppliers and service providers. Are you getting the best rates? Can you negotiate better terms or find alternative suppliers with more competitive pricing? Building strong relationships with your suppliers can also lead to discounts and better service. Utility costs, like electricity, water, and internet, can add up quickly. Look for ways to reduce these expenses by using energy-saving measures, like energy-efficient lighting and equipment. You can also shop around for better deals from utility providers or consider bundling services to save money. Salaries and wages are often one of the largest expenses for small businesses. While it's important to pay your employees fairly, there are ways to manage these costs effectively. Consider offering flexible work arrangements, like remote work or part-time positions, to reduce overhead costs. Investing in employee training and development can also improve productivity and reduce turnover, saving you money in the long run. Creating and sticking to a budget is essential for controlling your expenses. A budget helps you plan for future expenses, set financial goals, and monitor your progress. Regularly review your budget and adjust it as needed to reflect changes in your business environment. If you're unsure where to start or need help identifying areas for improvement, consider seeking advice from a financial advisor or accountant. We can provide valuable insights and help you develop strategies to manage your expenses more effectively. Regularly checking your expenses is vital for small businesses, sole traders, and contractors. By tracking every dollar, categorising expenses, analysing costs, and seeking professional advice, you can find ways to save money and improve your financial health. Remember, every little bit helps in building a successful and sustainable business!
In today's constantly changing business environment, it's essential to frequently evaluate if your business model is still effective and relevant. What worked a few years ago might not be suitable today, especially with the rapid changes in technology, consumer behaviour, and market dynamics. Here are some key points to consider when evaluating if your business model is still fit for purpose. 1. Market trends and consumer behaviour The first step in assessing your business model is to understand current market trends and consumer behaviour. Are your products or services still in demand? Have there been significant shifts in your industry that require adaptation? For instance, the rise of e-commerce and digital platforms has transformed how consumers shop and interact with businesses. Staying attuned to these changes can help you identify opportunities and threats. 2. Technological advancements Technology is a major driver of change in the business world. New tools and platforms can enhance efficiency, improve customer experiences, and open up new revenue streams. Evaluate whether your business is leveraging the latest technologies to stay competitive. This might include adopting cloud computing, utilising data analytics, or implementing automation in your operations. 3. Financial performance Reviewing your financial performance is essential to determine if your business model is still viable. Analyse key financial metrics such as revenue growth, profit margins, and cash flow. If you notice a decline in these areas, it might be time to rethink your strategy. Consider whether your pricing model, cost structure, or revenue streams need adjustment to improve profitability. 4. Customer feedback Your customers are a valuable source of insights. Regularly seek feedback to understand their needs, preferences, and pain points. Are they satisfied with your offerings? Do they see value in your products or services? Use this feedback to make informed decisions about potential changes to your business model. Engaging with customers can also foster loyalty and trust. 5. Competitive landscape The competitive landscape can change rapidly, with new entrants and innovations disrupting established markets. Conduct a thorough analysis of your competitors to see how they are adapting and what strategies they are employing. This can provide valuable insights into areas where you might need to innovate or differentiate your offerings. 6. Regulatory environment Changes in regulations and compliance requirements can impact your business model. Stay informed about any legal or regulatory changes that might affect your industry. This could include new environmental standards, data protection laws, or industry-specific regulations. Ensuring compliance can help you avoid legal issues and maintain a positive reputation. Regularly evaluating your business model is essential to ensure it remains fit for purpose in a dynamic and competitive environment. By staying informed about market trends, technological advancements, financial performance, customer feedback, competitive landscape, and regulatory changes, you can make strategic adjustments to keep your business thriving. Adaptability and innovation are key to long-term success.
Colour to Win
As summer approaches, businesses need to manage cash flow while getting ready for the Christmas break. Here are some tips to help your business stay cash liquid and help you enjoy the holiday season.
Managing staff isn’t just about what happens at work; it’s also about managing holidays. As an employer, you’re responsible for keeping accurate, up-to-date records about much-deserved time off.
In our latest round of Community Fund applications, we’re pleased to announce the successful recipients were: Valley Cricket Kiwanis Club of Morrinsville Positively Morrinsville Radio Auckland / Hauraki Dairy Industry Awards Living Well Trust Turua’s Event Committee A huge congratulations to you all! Just a reminder that our Diprose Miller Community Fund assists with funding for projects and events carried out by not-for-profit organisations and individuals in our local area. We want to support those people working to make our communities a better place to live. The fund aims to provide financial support towards ongoing operating costs and/or projects which help the people in our community. Key outcomes of our fund are to ensure that: our community wellbeing is protected; we’re supporting our community and cultural identity, and we’re helping people feel that they belong and can take part in the community. If you know a local organisation that could benefit from some funding support, our next round of funding closes at the end of December 2024. Click here for the full details.
