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How do I pay my relief milker? One of the most common queries coming across the Payroll desk is “How can I pay my relief milker?” Some relief milkers will refuse to accept work unless paid in cash, ‘under the table’, and this puts the employer in a difficult position. Someone is needed to do the work, but if the employer yields to this request, then the PAYE is not paid, the wage expense is not claimable, and another employer is pushed into the cycle of black market wages. Not a desirable method, as non payment of tax can have another name – tax evasion. For the purposes of addressing this matter, payments made to a relief milker are treated as per Section RD 3 of the Income Tax Act 2007, PAYE income payments are salary or wages (i), or Schedular payments (iii). In layman’s terms – if you make these type of payments, you have to pay the tax man. Wages are paid to the employee, with PAYE and ACC Earner Levy deducted. Employees need to complete an IR 330. They may use a CAE tax code. Be prepared to pay ACC Premiums, as these go hand in hand with the responsibilities of being an employer. For a sole charge farmer, looking to have some precious days off, these are administrative costs and duties that make the whole arrangement seem undesirable. The sole charge farmer may wish to consider paying a relief milker who is set up for Schedular Payments. Schedular payments are paid per invoice. Relief milkers on Schedular payments are deemed to be Contractors and will need to complete an IR 330C. Typically, the relief milker performs their duties, and then hands over an invoice, which will have a Withholding Tax amount recorded as well. This WT amount is payable to the IRD in much the same way as PAYE deductions. This does not trigger the need for associated ACC premiums. The relief milker purports to be in the business of relief milking, and therefore manages their own ACC. If there is no WT amount on the invoice, ask to see their Tax Exemption Certificate. If there is no certificate, then deduct 15% WT and pay to the IRD by the 20th of the following month. The Tax Exemption Certificate is not something that is ‘lost in the mail’. If it is not in the hand of your contractor, treat it like it does not exist,. GST or not GST? That is the question? Your contractor relief milker does not need to be registered for GST, especially if they are projected to earn less that $60,000 per year from there contractor earnings. If they are registered – great! If not, do not push it as a deal breaker. Your relief milker is more likely to remain happy with their line of work if they are not burdened with unnecessary administrative tasks and expenses themselves. GST registration will come as they become more at ease with their craft and gain more clientele, and thus, more income. In summary, don’t get sucked in to the black hole of under the table relief milkers, support good, reliable relief staff that want to be part of a successful industry and don’t let GST registration get in the way of a loyal, albeit occasional, member of your farming team. The CooperAitken Limited – Payroll Division is available Monday to Friday, 8.30am to 5pm, to attend to your payroll queries. We are happy to help! contact our payroll team

Employee injuries at Christmas Parties As an employer are you liable to pay first week ACC if your employee injures themselves at the work Christmas Party? Short answer, no. If an injury has taken place at a work party or event ACC would class this as a social event meeting. Therefore, it wouldn’t fall into the work-place accident category. However, it is important to keep in mind that company health and safety policies extends to any social event organized by the company. Even if that’s offsite and outside of normal working hours. Work Christmas parties are a kiwi tradition, and with a little planning you can ensure it is a fun and safe event for all! Here are some quick tips to help this holiday season: 1. Transport Plan transport in advance for anyone who will be drinking. This minimizes the risk of anyone having too many and getting behind the wheel. 2. Do something fun! Having some games, or an activity is not only great for team building but it also provides something fun to do. 3. Food and Drinks Ensure there are plenty of non-alcoholic beverages and food available, especially when alcohol is being served. 4. Communicate expectations. It’s a great idea to advise your employees that even though they aren’t at work they still need to conduct themselves appropriately at these events. contact our payroll team

my employee came to work on boxing day, but went home sick… Ask any employer that needs to operate their business on a Public Holiday, and you can almost guarantee that at some point, a team member has come in to work their Public Holiday and have needed to finish early due to illness. We know that ordinarily, an employee works a Public Holiday and are then entitled to time and a half for each hour worked, and an Alternative day off, so they can enjoy some down time at a later date. But what if only part of the day is worked? How is this scenario managed? To explain best practice, I am going to use the following scenario; Joe Bloggs works Mon to Fri. Their employment agreement states they are required to work a Public Holiday that falls on any day Mon to Fri. There is no detail in the Individual Employment Agreement stating that partial sick days are allowed. Joe starts work at 8am, and by 12pm, Joe tells his manager they need to leave, as they are not feeling well. Joe’s Sick leave management falls directly under the Holidays Act. Because Sick Leave under the Holidays Act is a full day, not a part day, providing a half day sick does not fit with the requirements of the Holidays Act, and the employee would lose a full day of sick leave entitlement. Therefore, the correct treatment will be; Employee gets paid 1.5 x 4 hours, an alternative holiday for the public holiday worked, and 4 hours paid based on a Public Holiday Taken. Providing a Public Holiday Taken because the employee was at work and then went home sick on a public holiday fits the theme of how other leave is not used on a public holiday, under the act. In conclusion – a public holiday is a public holiday for an employee and any other type of leave provided under the holidays act is not applied on that day. Contact our Payroll team

Looking at farm compliance as a cost to your business is now an outdated view.  While it may not be creating value, it is protecting the value of your business, with multiple financial implications for not complying with regulations today. These include; fines for breaching regulations, missing out on premium payments from Farm Assurance Programmes (like Co-operative Difference), higher ACC levies, lower farm sale value, and now banks are starting to pay more attention to how you manage compliance. Regulations Regulations that have been in place for years, such as discharging effluent to land, has seen farmers fined $35,000 for one-off breaches, and up to $80,000 or higher for repeated offences. The stack of new freshwater regulations introduced over the last few years hasn’t resulted in fines issued yet, with the Regional Council currently taking an educational approach, however, this won’t last forever.    Breaching the Health and Safety Act can result in fines of up to $280,000 for employees seriously injured or killed on farm.  Reparations on top of that could be over $100,000 depending on the extent of the injury. Insurance cannot be claimed for fines given under the Health & Safety Act. Breaching the newly introduced Water Services Act by supplying unsafe drinking water could result in fines of up to $300,000 for individuals and up to $1.5 million for a company if found negligent, even more if it was found to be through reckless behaviour.  If you fail to register your water supply, you can receive a fine of up to $50,000 for an individual or $200,000 for a company. If you’re not aware, you are a water supplier if your water source supplies more than one household.  This a new act and is yet to be tested in the courts, so it will be a wait and see to see how fines are administered. ACC Having a healthy and safe workplace is likely to have fewer claims and staff days off. ACC is encouraging businesses to further prioritise the health and safety of people by offering financial incentives. After three years of paying a work levy, you can receive discounts or penalties depending on the number of claims you have had, or not had. Other Health and Safety incentives include not having the cost of a staff member unable to work on farm, reduce R&M costs of farm equipment and lower insurance premiums. Assurance Programmes With consumers increasingly wanting to know if their milk is ethically produced, not only environmentally but also regarding how farmers are treating their staff and animals, milk supply companies are paying premiums to reward farmers that produce high quality milk.  Generally, many of the requirements for farm assurance programmes are what is legally required anyway, and they help to maintain a farmer’s social licence to operate. Not participating in these programmes means you miss out on much needed additional income. Farm values A recent report into the dairy property market by Colliers Rural Valuation shows farms that have a good approach to compliance are achieving higher sale prices.  These farms are providing a clear indication to potential buyers that they can sustain current farming practices well into the future, giving buyers certainty. Banks Banks are no longer just taking the book value of a business into account when assessing interest rates and loans,  they are also assessing your individual risk.  Your compliance with on-farm regulations is playing an increasingly important role. Loans are starting to be declined based on environmental non-compliance. There aren’t huge numbers yet, but a client of ours recently  experienced this with their bank, so we know it is starting to happen.  Managing the risk around non-compliance helps protect your farm’s value as well as income now and into the future. In many cases you are already complying with regulations, the only thing you need to do is prove it.

Are you feeling burned out from business?The last three years have been demanding and exhausting for many business owners. The challenges have been relentless, and we know many small business owners have had to navigate unprecedented demands because of the pandemic and related government regulations. Burnout results from long-term stress and can manifest in emotional and physical exhaustion, which may affect your enthusiasm for running the business you once loved. What can we do about burnout? We understand that as a business owner, you have many responsibilities, and often you do everything on your own. So we know how hard it can sometimes be to keep on top of all your obligations. The most important step is to acknowledge you feel burned out and need a break. Take a break as soon as you can. Plan ahead for some time away from the business. However, while getting some rest in the short-term will help, long-term stress will take commitment to recover from. What can you do differently to avoid prolonging or retriggering the burnout? Here are some strategies to help with burnout; Delegate – Look at the low-value tasks you spend time on – can you out source some of these tasks? This will help free up some time and energy. Stand back – Take an objective look at how much you are working and how effective you are. For example, is it time to streamline your work activities and put boundaries around working hours? Reassess your goals – Do you have clear business goals for the short-term and long-term? Either set some realistic goals or revise them if they are too difficult right now. Re-energise – If you’re struggling with a lack of enthusiasm or purpose, talk to colleagues, a business coach, a farm advisor or even a friend for support. If possible, connect with people in the same industry so you can share among others who may be facing similar challenges. Commit to some regular self-care actions – Think about what you love doing outside your business that is nourishing. Regular exercise? Time in nature? Going on a retreat? Learning something for fun? Improving your diet? Get an app on your phone that reminds you to take mini breaks throughout each day. Whether that is movement, mindfulness or music, use technology to help. Celebrate milestones and achievements – When overwhelmed with stress or exhaustion, it’s easy to forget the positives. Remind yourself of just how much you have done in the last year! Need Some Support? You’ll be better able to face challenges, run your business well and assist others if you are looking after yourself well. If you’re feeling burned out and need help in managing systems, technology, payroll or any other financial planning, strategy or management, give us a call. We’re here to help and can guide you back to passionate engagement with your business. Some helpful resources for business support; Ministry of Business, Innovation & Employment – Support for businesses EAP Services – Support for organisations Rural Support Trust – Help & Support for Rural People Business.govt.nz – Resources & support for businesses

Our business environment has been challenging for some time, and it is likely to continue in the near future. There are pressures with rising costs from suppliers, wage costs increasing, and an inability to attract new employees, just to name a few. Being an election year business owners have elevated levels of uncertainty with potential changes to policies that affect their livelihoods, family, and their staff.  There are many external factors that we cannot control such as rising interest rates, inflation, and a tight labour market. So, let’s focus on looking inward at our own businesses and see what we can improve to alleviate some of this pressure.  This article looks at ways to improve cash flow into your business from customers, focusing on your accounts receivable and reducing the time it takes for you to get paid. Reassess your customer payment terms Many commercial businesses follow conventional payment terms of payment being due by the 20th of the month following the invoice date.  Traditionally invoices would be sent by post at the end of the month with the due date being the 20th of the month, this gave people enough time to post their payment by cheque to their suppliers.  Technological advancement has seen invoicing processing time shrink considerably so you could look to reduce the payment terms to 14 or even 7 days following invoice date.  In terms of money entering your bank account how much would this change impact your cashflow? An example of how this benefits your cash flow is if you completed a job on the 4th of the month and billed it to your customer by the 6th of the month you could expect payment on the 20th that same month, this shows a cash conversion cycle of 16 days. If you kept the status quo then you could be waiting for payment until the 20th of the month following, this adds 31 days until you are paid for work completed.    If your bank balance is currently in overdraft then you are effectively paying the bank interest while you wait for customers to pay you. Would you be happy to discount your customer’s bill by the current interest rates being charged, say 15%?  In a way you are wearing the 15% interest cost of these credit terms.  In order for you to be able to achieve this potential cash benefit you would have to ensure your team has the capacity to generate an invoice promptly following the sale or completion of work.  If not, then perhaps a streamlined invoicing process is another key area of focus to consider.  Give customers ease with payment options These days there are many options for securing payment from customers.  Most people have access to Internet banking apps on their phones and can pay bills from anywhere and at any time.  The major banks now process money transfers seven days a week. This is good news for everyone as cash is flowing quicker than ever before. Put yourself in the place of your customer – what options are there for paying your business? Do you offer multiple payment methods? Here are some common ones to consider: Online banking – provide bank account number on your invoice or statement and the customer can pay at any time that suits them. Payment by eftpos or credit card – either at your business premises or mobile Direct debit – great for ensuring payment is received on time. Online – include links on your invoice to a payment service provider to process credit card payment or offer POLi for direct bank transfer Website – add a ‘pay now’ function on your website Cash – if you receive cash it is best practice to provide a receipt to your customer either electronically or from a carbon copy receipt book.  The goal is to make it convenient and easy for customers to pay. Asking for a deposit for sales where you agree on the price prior to starting the work is a great way to help with cashflow. The above-listed payment methods are not without risk or cost. Credit card and Paywave attract merchant and bank fees and a cash handling fee can be charged when depositing cash. In the world in which we operate, this is a cost of operating a business. Choose the options that you prefer once considering the cost and risks of each method. Talk to your customer There are  tools available to remind customers to pay their account such as end-of-month statements, automated invoice reminders, and charging late payment fees or interest to overdue accounts. These are often effective methods to trigger a payment response from customers.  When these tools are not enough it is important to phone and talk to your customer. Often a few minutes talking to your customer will result in action from them. Take a proactive and empathic approach to this.  It can be easier to ignore automated statement reminders whereas by talking with a customer you can help clear up issues. If you are willing to agree to a payment plan this can be preferable to the non-payment alternative. Note with payment plans there is a delay in when you receive payment, therefore you may wish to add interest to a payment plan to account for this delay. Getting paid on time is one important part of improving your cash inflows. Having money coming in when it is expected helps alleviate pressure and helps with your ability to pay your bills when they are due. Set aside time to regularly review your accounts receivable and be proactive with overdue accounts. Challenge yourself to put some time into assessing what changes you could make to improve the time between sale and payment. We want you to get paid for your hard work and effort. Please reach out to us if you want a sounding board or further advice on how to improve your current payment terms or methods.  Eddie Maber, Accountant.   Returns to

You might be considering offering some kind of incentive or bonus for your staff. It’s important to be aware that there are two types of bonuses an employer can give, an incentive payment or a discretionary bonus, and they are quite different. An incentive payment is generally paid on a regular basis if X Y & Z criteria are met. This criteria is outlined and agreed upon in the individual employment agreement. It is a set amount and is agreed upon in the contract with the employee. If the criteria outlined are met, then the employer must make this payment. However, a discretionary bonus is paid at the sole discretion of the employer. They are generally also performance-based, but the main difference is that it is not considered part of the employee’s regular pay and does not make up their total package. The employer can change the amount of this bonus at any time or not make a payment at all. Tax on bonuses also differs depending on what type you are paying. An incentive payment that is paid on a regular basis is taxed according to the employee’s tax code as this is considered part of their salary package. To work out the correct amount of tax on a discretionary bonus we need to apply the lump sum taxation method as this payment is above and beyond their normal wage. When selecting which type of bonus to pay your staff, it is also important to keep in mind the effect it has on holiday pay. As an incentive payment is part of the employee’s regular pay it gets included in their calculation for the average daily rate or relevant daily pay, therefore it bumps up the hourly rate that is required to be paid on holiday pay. In contrast, the discretionary bonus is not considered with these calculations as it is not part of their regular income. Our advice on bonuses is that you need to be very clear on what type you are paying and the effect it will have on your business. Have very specific parameters for the bonus, e.g. If you reach your sale target of $2,000 per month for the sales quarter of January to March, an incentive payment of $200 will be paid on the 20th of April. Or, A discretionary bonus of $500 might be paid to the employee for a Christmas bonus in December depending on the employee’s performance. As this is a discretionary bonus the employer can decide to change the amount, payment date or not make the payment at all. Ensure your employee understands if it is an incentive payment or a discretionary bonus and what that means to them. Bonuses can be a great way to incentivise your existing employees or recruit new ones. The trick is for the employer and the employee both to understand exactly what criteria need to be met for a payment to be made, how the payment will be taxed and if the bonus is discretionary or not. Here’s a quick breakdown of the differences; Incentive Payment Discretionary Bonus Calculated at normal PAYE Rates Calculated on Lump Sum Taxation Is a pre agreed amount that must be paid Is a discretionary amount that can be paid Is part of the whole salary package Is in addition to the salary Affects the holiday pay rates Does not affect holiday pay rates It is always a good idea to get expert advise that is tailored to your specific business and at CooperAitken we are more than happy to help. Anna Hollingsworth, Payroll Administrator Contact our Payroll Team:P: 07 889 7153E: wages@cooperaitken.co.nz Returns to blogs

The Taxation Principles Reporting Bill was recently introduced to Parliament stating that “The Government would like to increase the public’s understanding of the tax system and promote informed debate and discussion about its future”.   The Bill proposes 7 principles that are to be “universally accepted” as underpinning the design of good tax policy.  The principles identified are: horizontal and vertical equity; efficiency; revenue integrity; certainty and predictability; flexibility and adaptability; and compliance and administration costs.   This Bill comes off the back of 3 years of highly complicated and, at times, ad hoc changes to the tax settings that has occurred in the last 15 years.  The goal of efficiency is that “Tax revenue should be raised in ways that minimise distortions to the economy and the use of resources” whereas certainty and predictability aims that “People should be able to determine their tax obligations before they are due”. Though being at the theoretical end of tax legislation, had these principles been applied earlier we could have avoided the situation of having the ever increasingly complicated Bright-Line test rules and avoided the distortionary limitation of interest deductions on residential rental properties. The interest limitation rules for residential rental properties is one of the most unnecessary and complicated changes to the taxation system seen in a long time.  Had the 7 tax principles ruler been run across this legislation at the time it would have surely failed almost all of them.  The rules are proving to be distortionary and producing an outcome where an arbitrary date determines whether a property is able to have interest deductions for a period of 20 years or no interest deduction at all. It is the worst example of using the taxation system to attempt to fix a non-tax issue without regard for the distortions and complexity it creates for taxpayers.  It also opens the ability for the bigger and more well-resourced taxpayers to lobby for exemptions such as build-to-rent developers. There is no equity to giving larger landlords the ability to access an interest deduction due to scale vs the mum and dad investor who now cannot.  The 10-year (or 5-year if it is a new build) Bright-Line test is another example of the difficulty that taxpayers have in understanding their tax obligations without the assistance of tax professionals. Remembering that the principle of certainty and predictability means that taxpayers should be able to determine their tax obligations before they are due.  Some of the recent tax policy decisions that have been made has resulted in a highly complicated and ever increasingly difficult set of tax rules for the everyday taxpayer to navigate.  All too often taxpayers are caught out with a nasty surprise after they have sold the property, filed their tax return and merrily gone on with their lives. Often this is as a result of an accident rather than an attempt to derive income from property transactions, whether it is the misapplication of the main home exemption, of which there are now also different tests depending on when the property was purchased, through to change of circumstance situations for which there is no leniency. Brightline began with an aim of taxing property speculators who ‘flipped’ houses for a living. Now we see an ever-increasing list of exemptions and roll over relief provisions necessary to ensure negative tax consequences can be avoided.  This is a prime example of a set of rules are now far overreaching beyond their initial aim. There is very little flexibility in these rules, by design, which is resulting in tax outcomes not originally intended by the legislation. We can only hope that the principles within this piece of legislation result in more rational and logical tax rules and that future governments both apply it to the tax policy they set and engage in a process of removing some of these unnecessary and at times punitive tax burdens that we have seen appear.  And finally, remember, “The hardest thing in the world to understand is the income tax” – Albert Einstein. Rory Noorland,Partner, CA P: 0800 866 191E: rory@cooperaitken.co.nzM: 021 721 368 More on rory Returns to blogs