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Requirements as per the Wages Protection Act 1993 From time to time, in your employment relationship, you may extend permission to your employee to use your Trade account to purchase personal items, or tools that then become subject to a tool allowance paid to them as part of their package. For our Agricultural clients, a common arrangement is the processing of a livestock unit for the freezer. The legislation regarding deductions from wages very specifically requires written consent from the employee. An employer should request the employee to sign a deduction form so this money can be deducted from their ongoing and/or final pay. Government departments and agencies, such as Ministry of Justice, making deductions against an employee’s wage or salary, are exempt under the Act and no employee consent is necessary. If the employee has a deduction clause in his employment agreement, this then becomes a requirement to consult the employee instead. Email or text messaging is a great way to instigate the consultation process, as it gives you a written record. When entering into an arrangement of this nature with your employee, it is important to keep an open line of communication regarding this transaction. An employee is entitled to cease payments or vary the amount – a request which must also be submitted in writing. Normally changes to, or cessation of, payments is processed within two weeks of the employee providing written notification. It is vital to take into consideration that Section 5 of the Act has some important information regarding such a transaction. Section 5. Deductions with worker’s consent An employer may, for a lawful purpose, make deductions from wages payable to a worker-a) With the written consent of the worker (including consent in a general deductions clause in the worker’s employment agreement); orb) On the written request of the worker.  An employer must not make a specific deduction in accordance with a general deduction clause in a worker’s employment agreement without first consulting the worker.  A worker may vary of withdraw a consent given or request made by that worker for the making of deductions from that worker’s wages, by giving the employer written notice to that effect; and in that case, that employer shall –a) Within 2 weeks of receiving that notice, if practicable; andb) As soon as is practicable, in every other case, – cease making or vary, as the case requires, the deductions concerned. If in any doubt, obtaining permission in writing will cover deductions made, and will assist in preserving a harmonious employer / employee relationship. Our dedicated payroll team are always available for practical advice and  documentation templates. If you require further assistance, please contact our Payroll team. EMAIL OUR TEAM CALL OUR TEAM

If you are buying or selling a business or property from 1st July 2021 the new purchase price allocation rules may apply to you. What is the purchase price allocation rules? Prior to 1st July 2021 there was no requirement for vendors and purchasers to agree on each individual asset value when assets were purchased or sold. This could mean that the vendor or purchaser could set the sale price for their best interests to minimise tax. Business asset sales can involve a mixture of: taxable assets such as trading stock, accounts receivable, patents depreciable assets such as plant or machinery non-taxable assets such as business goodwill A Sale and Purchase agreement could have a universal sale price and no breakdown of the individual assets making up the total price, meaning the vendors and purchasers chose how to split the sale price up between taxable assets, depreciable assets and non-taxable assets. Purchasers may have had more taxable expenses to claim if higher values were placed on taxable assets and depreciable assets. Whereas vendors may have had less tax to pay if high values were placed on capital non-taxable assets such as goodwill or depreciable assets. When do the rules apply and what is the criteria? From 1st July 2021 the rules will apply to transactions with a total purchase price of more than $1 million where there is a mix of taxable and non-taxable assets of $7.5million or more relating to a sale of residential property. Why are there new rules?The purpose of the new rules is to eliminate “mis-matched” purchase price allocations. In the past the IRD may have missed out on tax revenue due to purchasers and vendors treating the breakdown of the sale price differently i.e. the purchaser may have been able to claim depreciation expense on assets and on the same transaction the vendor did not return deprecation recovery on asset sales as taxable revenue. How are the new rules implemented? If the vendor and purchaser agree on the breakdown of the asset amounts, then these values will be recorded in the sale and purchase agreement. This will mean the parties agree on how the sale price is allocated between taxable, depreciable and non-taxable assets and then these values will be used for tax purposes. The agreement should be made and documented before either the vendor or purchaser submits their income tax return that includes the tax position for the sale. Neither party needs to notify IRD about the agreement unless requested. It is important to note, if the IRD consider the agreed amounts do not reflect the asset’s market value, they can still re-allocate amounts.   If the vendor and purchaser do not agree and the total purchase price is $1 million or more, or for residential property with a purchase price of $7.5 million or more, the following rules apply: The vendor within 3 months of settlement of the transaction may determine the amounts allocated and must notify both the purchaser and IRD of the amounts. The amounts cannot be less than the greater of the market value or the vendors tax book value for the assets. The amounts must be used by both the purchaser and vendor for income tax purposes. In the event the vendor does not notify the IRD and the purchaser within the 3-month timeframe, then within a further 3 months (within 6 months of settlement) the purchaser is then entitled to set the allocation and is obligated to notify the IRD and the vendor. The amounts cannot be less than market value for the assets. The amounts must be used by both the purchaser and vendor for income tax purposes. If the purchaser does not make a notification within the further 3-month timeframe, then IRD may allocate amounts to each asset. Any tax deduction that the purchaser is entitled to may be denied until the following year’s tax return. To Do: Set asset values in all Sale and Purchase Agreements – Don’t get caught out. It has always been good practice to reach an agreement of the values for the asset amounts in the Sale and Purchase agreement. Now more than ever though it is vital this is agreed to at the time of the agreement so you can make a decision to purchase or sell based on all the relevant tax implications. We recommend seeking our advice at the beginning of the sale or purchase process to ensure we can work with you to obtain the best tax outcome for the sale or purchase. DOWNLOAD A COPY Anna BennettDirector and Chartered Accountant P: 07 888 8002E: anna@cooperaitken.co.nz 

In March of this year the Government extended the Bright-line test to 10 years, the effect of this extension creates what is essentially a capital gains tax on residential property that is unable to be exempted as a main home, a business premises or a farm.  Although intended to target property investors it will have an impact beyond just investment properties. In particular, some lifestyle properties and holiday homes will likely become subject to tax if sold within a ten-year period and a gain is made. There are now three situations in which the sale of a property can be caught under this test.  Any gain made on sale will be taxable if; Purchased on or after 29 March 2018 and sold within 5 years Purchased on or after 27 March 2021 and sold within 10 years Purchased on or after 27 March 2021, it meets the new build investment criteria and sold within 5 years The family home will continue to be exempt from the bright-line test and property transferred under a relationship property agreement or inherited will continue to be provided relief. Also included in the changes was the inclusion of a change-of-use rule for the bright-line test.  This means that if the property is not used as a main home for a period longer than 12 months it would be subject to tax for the proportion of time not used as a main home if sold within the bright line period and a gain is made.  This will add significant complexity and require taxpayers to keep a track of the time that a property has not been used as a main home. Some of the traps that we are seeing with such a long bright-line test period are as follows; The sale of bare sections within the bright line period cannot be excluded under the main home exemption. As a house has not been built on the property it cannot be considered a main home. Properties that are too large to be considered a lifestyle block but too small to be considered a farm can be captured if the property is not used predominantly for the enjoyment of the owners. For example where 5 Ha of a 6ha property is leased to the neighbour the main home exemption will not apply. Second homes or holiday homes are not able to be exempted under the main home exemption. Properties jointly owned by parents and their children are being caught as the parents are unable to apply the main home exemption if the children purchase the remainder of the property off them. Restructuring will often reset the bright-line test period and can result in properties being brought into the bright-line test that we previously outside of it. There are a few other points to note; Any sale of a property between associated or related parties will be deemed to occur at market value. The end date for the test is the date of signing an agreement for sale which is in contrast to the start date which is the date of title transfer. Transferring more than 50% of the shares in a company that owns a property will trigger the bright-line test. Note a company cannot apply the main home exemption. Changing to or from a Look Through Company status will also trigger the bright-line test as it is considered a deemed sale and acquisition of all property owned by that company. A person can only have one main home, however spouses may have different main homes depending on living arrangements. A trust can apply the main home exemption based on the property that the main settlor resides in as their main home. A beneficiary solely living in the property cannot apply the main home exemption unless they are also the main settlor of the trust. It has been clarified that serviced apartments are captured by the bright-line test and not excluded as business premises. This also impacts residential houses being solely rented on air bnb etc. Finally it is worth noting that the bright-line test, which can only be described as a capital gains tax, has now become far more onerous than any capital gains tax previously proposed.  With the introduction of the 39% tax rate on personal income over $180,000 per annum there is a risk where property is owned by taxpayers in their personal names that this rate could apply.  This should be contrasted with the capital gains tax that was proposed during the 2017 election by Labour that had a rate of 15%. As you can see the bright-line test, originally quite simple, has now become both complex and potentially onerous.  We would recommend that you discuss any property transactions with us prior to signing any agreement so that you are aware of the implications of doing so. DOWNLOAD A COPY Rory NoorlandDirector and Chartered AccountantP: 07 889 7153E: rory@cooperaitken.co.nz  Read more about Rory

Parliament has passed the Holidays (Increasing Sick Leave) Amendment Bill to increase the minimum employee sick leave entitlement from 5 days to 10 days per year. Most employees who have worked for an employer for six months or over are entitled to sick leave if they, or a dependent, are sick or injured. Currently, employees are entitled to 5 days of sick leave per year; however, from 24 July 2021 this will increase to 10 days per year. Employees will get the extra five days when they reach their next entitlement date – either after reaching 6 months’ employment or on their sick leave entitlement anniversary (12 months after they were last entitled to sick leave). So, for example, take an employee who has been employed since 20 January 2021. They become entitled to sick leave on 20 July 2021. They will be entitled to only 5 days, because the new law won’t yet be in force. On their next sick leave anniversary, 20 July 2022, the employee will receive 10 days sick leave. On the other hand, take an employee who has been employed since 20 June 2021. Because they will have been employed for less than six months when the Act comes into force (on 24 July 2021), their entitlement to 10 days sick leave will occur on 20 December 2021 (that employee’s six-month anniversary). Employees who already get 10 or more sick days a year will not be affected by this change. The maximum amount of unused sick leave that an employee can be entitled to will remain 20 days. NOTE:Casual employees are also entitled to sick leave and bereavement leave after 6 months of starting work if during that time they have worked: an average of at least 10 hours a week least one hour a week or 40 hours a month. Please talk to our payroll team if you need further support or advice. P: 07 889 7153E: wages@cooperaitken.co.nz 

Now is time to talk about the taboo subjects – Strategic Planning and Budgets. Why is it taboo? Well, there are a number of reasons like the following; I don’t know where to start It will cost me It requires effort, time and thought I know my numbers and they are heading in the right direction anyway There is no value in doing it It is like anything in life, if you don’t plan and do the necessary steps, you won’t get there.  No different to the challenge of losing weight or putting muscle on, there’s always essential components -the goal, the exercise and the diet.  To do any one of these is not enough, you need the full combination to achieve what you are aiming for.  I love the saying’s “Aim for the moon.  If you miss, you may hit a star” and  “If you aim for nothing then you will surely hit it”. Another director at CooperAitken often reminds us that we only have so many working days left in our life, I can’t remember his exactly, but if I did it for myself it would look something like this.  I would have only 3,440 working days left to make a difference for my family and retirement.  Only 28% of my time left to achieve some goals. We at CooperAitken have a real focus on working alongside our clients and planning for the future. The first step is understanding what your goals and future looks like and this changes at each stage of your life. Simple at the start when you are single, a little different when you have a partner and then the next change when you have a family or want to do something for others. It does not matter what you are doing for an income or how you are getting an income, but it does matter what you do with it. Strategic planning is not just about dollars but also focuses on the other areas you want to achieve in your life like work-life balance, supporting the community and the greater family, doing something for your industry and helping out the environment. Wealth and a higher standard of living comes from doing those hard yards, it does not come to us on a plate and if it has turned up, it still needs to managed because it will disappear quickly. Key elements of Strategic Planning are: Understand your external environment Complete a SWOT analysis of your internal organisation and external environment Involving the key decision makers/Shareholders/Directors Understand what the future could look like Consider the opportunities and how you can use innovation and technology Understand how and what you need to execute the strategy Wrap dollars around the financial value of the strategies Plans need to be flexible Where possible use data to substantiate the strategy Make sure there are actions With every action you need to know the measures to know if you are succeeding or not Produce a 1 page high level plan so it can be looked at on a regular basis and can be shared with the wider team Once you have a Strategy and a Vision of what you want to achieve then one of the other areas you focus on is budgets.  The budget helps to show the likely impact of your strategy. Budgets need to be dynamic and looking at more than the year in front. They should extrapolate the likely outcomes for the next 5 – 10 years at a high level.  They need to reviewed regularly and updated as things change. The budget is the tool we use to hold ourselves accountable to the strategy.  If we can achieve budget or close to budget then it will allow you to carry out the strategies and goals you want to achieve. Compounding works.  If you put a $10 per week aside and you get a 5% return on your investment, at the end of 25 years you will have $26,059.  Not bad for putting aside $10 per week.  If you changed it to $100 per week, then it would be $260,590. Take the time to do a budget and now is the time to do it. Start off a new financial year or before your next financial year begins.  Work with your team of advisors.  Let’s work together to achieve your goals with the help of CooperAitken.  The benefits will outweigh the costs. Act now to make a difference to your future! Peter HexterDirector and Chartered Accountant P: 07 889 7153E: peter@cooperaitken.co.nz 

Now is a good time to get familiar with the new Co-operative Difference payment so you can make a plan on how to achieve the standards and receive the 10 cent payment. From 1 June 2021 Fonterra is changing the way farmers are paid for their milk through the introduction of a new milk payment parameter called the Co-operative Difference. This will see a proportion of a farms milk payment influenced by the farms progress under the Co-operative Difference by up to 10 cents per KgMS. It is important to note that the 10 cents is included in the current milk price not on top of. So if the milk price is set at $7.60, you will receive $7.50 unless you reach the required standards under the Co-operative Difference milk parameters. The regime is part of getting the best return for farmers and is determined by Fonterra’s ability to access opportunities and markets who demand good practices on farm in relation to animal wellbeing and guardianship of the land. This means staying at the forefront of issues such as quality, safety and sustainability – that is what the new Co-operative Difference is all about. The Co-operative Difference payment is divided into 2 parts. The first part (Te Putake) being the 7 cent standard which is based on four main areas of achievement which cover Environment, Animals, People, and Co-op & Prosperity. The second part (Te Tihi) is the 3 cent achievement which is based around milk quality. To access this payment you must have first past the achievements to receive the 7 cent payment. The milk quality standard requires a farm to achieve milk quality excellence for at least 30 days. From that point onwards, ensuring you still maintain the milk quality excellence, you will get the 3 cents for milk supplied during this excellence period. So where to from here for my farm? The first step is to get the four achievements to access the 7 cent payment. These are listed below and give a brief outline of what they might look like to achieve. Further detailed information is provided in the official Fonterra documentation. Achievements under Te Putake 1          Co-op and Prosperity The requirement under this achievement is not a lot different to the current Dairy Diary. The big change here is it needs to be done online. 2            Animals The requirement under this achievement is to have an Animal Wellbeing Plan signed off by your vet annually. This shouldn’t take longer than 15 minutes to complete and conveniently many vets already have a good template that covers the main areas. Nutrition – Strategies to ensure cows reach body condition targets. Health, mastitis, lameness, mortality and minimising antimicrobial resistance. Environment – Planning for extreme weather events and development of management strategies for heat stress. Behaviour – Discussion about current and future herd improvement strategies through genetics. 3            EnvironmentTo pass the environment standard the farm must have a farm environment plan in place and be achieving 3 out of the 4 key practices (more on this below). If your farm does not have a Farm Environment Plan completed, please ensure you are registered for one with your Area Manager. You will still need to meet three of the four key environmental practices areas:             Environmental Practices; Purchased Nitrogen surplus is at or lower than 138kg/N/ha – you will find this figure on your Fonterra Environment Reports Participation in product stewardship scheme for on farm plastics and agri- chemicals – verification of this will be receipts. One of the approved schemes is Agrecovery  No discharge of farm dairy effluent to water 80% farm grown feed fed across the system 4            People and Community To pass this achievement your farm is required to achieve 100% on the Dairy NZ Workplace 360 Assessment on the Foundation level. Many of the questions in the assessment cover items in relation to Health and Safety, Employee records timesheets, leave records and rosters. The farm must have evidence to support the answers submitted. The good news here is you can complete the test as many times as possible until you get 100%, and the test gives you examples of where you can improve and how you can achieve a pass (Dairy NZ Workplace360 Assessment). The official verification of your achievement of the four achievements will be completed at your Farm Dairy Assessment.  You will need to give Fonterra no less than ten days’ notice prior to the Farm Dairy Assessment (you can do this through logging into your portal on the Farm Source website – the verification is the green circles on the Farm Source home page). QCONZ will be verifying documentation at the time of the assessment. The payment for this milk will be paid with the Retrospective payments. So where to from here? Co-op & Prosperity  – Start doing dairy diary online from 1 June. It’s easier than paper, your Area Manager can help and provide training in this area. Animal – Make a phone call to your Vet to get the Animal Wellbeing plan completed. Environment Plan – this is something that the farm has to complete anyway People – Achieve 100% in the Dairy NZ Workplace360 Assessment One thing is for sure, change is constant in business and farming is no exception. The Co-operative Difference payment is an opportunity for Fonterra farmers to make steps towards what will eventually become compliance. For some farmers there will be changes that need to be made to achieve some standards, in particular around the People and Community Standard. Achieving the 100% on the Foundation Level may require some changes or new procedures to be implemented with regard to Employees and Health and Safety.   We are here to help you through this process. If you would like to come in and sit the test at our office, please get in touch. We can also help you to set up and manage your documents and systems to allow you to achieve the 100% pass. nzfarmsource.co.nz/co-op-and-financials/the-co-operative-difference.html

The Government’s latest announcement regarding changes to legislation in response to soaring house prices will affect existing and future property investors as well as the first-home buyer.  It is clear the government are making the ownership of rental properties less attractive with use of the taxation system.  The potential impact being the exit by these investors and in turn providing housing stock that would be available for First-Home buyers to then purchase. The removal of interest deductibility will have a significant impact on both the return on investment and free cash flow from investment properties with a high level of borrowing.  There is already the impact of ring fencing of residential rental losses being felt by investors, this however, is a significant deviation from the long established concept of being able to deduct interest costs where the borrowing relates to earning income. The extension of the bright-line was widely expected; many picked ten years was the next logical step for increasing the proportion of property caught in what is essentially a capital gains tax.  This will have an impact beyond just investment properties. In particular, some lifestyle properties and holiday homes will become subject to tax if sold within a ten year period and a gain is made.  Less expected was the inclusion of a change-of-use rule for the bright-line test.  This means that if the property is not used as a main home for a period longer than 12 months it would be subject to tax for the proportion of time not used as a main home if sold within the bright line period and a gain is made. The Government’s detailed announcements are as follows: Bright-line test extended to 10 years which means that people who buy and sell investment property within 10 years will need to pay income tax on any gains made from the sale. The Bright-line test looks at whether the property was either: Purchased on or after 1 October 2015 through to 28 March 2018 and sold within 2 years Purchased on or after 29 March 2018 and sold within 5 years Purchased on or after 27 March 2021 and sold within 10 years The family home and any inherited property will continue to be exempt from the bright-line test, and the bright-line test for new build investment properties will remain at 5 years. Interest deductibility on investment property removed, therefore property investors will no longer be able to deduct the interest on the loans used to purchase the property from their rental income as an expense. The legislation will apply from 1 October 2021. Interest deductions on residential properties purchased on or after 27 March 2021 will not be allowed from 1 October 2021. Note that interest on loans for properties purchased before 27 March 2021 will remain deductible but the amount you will be able to claim will be reduced over the next 4 years. At the end of the 4 year period none of the interest on the loan will be deductible for income tax purposes.  There would however, be an exemption for newly built homes. $3.8 billion Housing Acceleration Fund set aside to aid the funding of infrastructure around housing developments. Price and income caps raised for the Government’s First Home Grants and First Home Loan which means that more first-home buyers will be eligible for the existing First Home Grant and First Home Loan. The Government will also help Kainga Ora to borrow an additional $2 billion to aid in strategic land purchases to enable the building more affordable state housing. It is disappointing to see the continued use of tax measures to try to control house prices resulting in different taxation outcomes within a group taxpayers. The risk of creating distortions in investment decisions and the unintended consequences are high when taxation is used as a lever.  Each business owner and/or investor will have a range of structures and operating models.  When tax policy is targeted at a desired outcome, this is likely to create unexpected results for different taxpayers depending on their particular situation. As with any tax change, the devil is in the detail and the impacts of these changes will become better known over time.  If you would like to discuss your particular situation and review how these changes may affect you and your business, please contact our office to discuss further.

“The Taxman giveth and the Taxman taketh away” an adage that has always rung true. We are entering a new financial year which brings with it changes to legislation which will be favourable for some taxpayers but not so much for others. A new top tax rate of 39% will apply to all employment income over $180,000. Whilst a new tax rate and threshold may seem quite simple to enact, in reality quite the opposite is true and a number of additional legislative changes are also required. The additional changes are required to ensure that all types of personal income tax are taxed at the same rate. Other tax types that will be changed to align with the 39% tax rate are as follows: Secondary Tax Codes – a new tax code (SA) for secondary employment earnings of an employee whose total PAYE income payments are more than $180,000. A new top FBT rate of 63.93% will apply to all-inclusive remuneration exceeding $129,681. Employer Superannuation Contribution Tax (ESCT) and Retirement Savings Contribution Tax (RSCT) will rise to 39% Resident Withholding Tax on Interest– a new 39% rate being introduced which mirrors the new top personal tax rate. A new 39% rate will be used where a taxable Maori authority distribution of more that $200 is made where the Maori authority does not have a record of the IRD number of the member to whom the distribution is made. Note the above changes come into effect on 1 April 2021 with the exception of the change in the Resident Withholding Tax rate which will only apply from 1 October 2021. The 39% tax rate creates complications in the tax system as it creates a larger variance between the various tax rates, for example a company is 28%, a trust 33% and now the highest personal tax rate is 39%. Provisional Tax for individuals who are affected by the rate change will need to be reviewed and adjusted throughout 2021 to account for the additional tax payable. The following are examples of what items need to be addressed prior to the rate change: Distribution of retained earnings in companies, especially where the shareholding is held at a personal level and the shareholder has income of close to or over $180k per annum Review investments to ensure that they are in the correct entity from an tax efficiency perspective Lastly, though it may be possible to change business structures under our current laws in relation to tax for companies and trusts to mitigate the rate change, Inland Revenue has issued a warning that it will be monitoring any structure changes carefully to ensure there are no changes to structures that constitute tax avoidance. Trusts will have Increased Disclosure Requirements with Inland Revenue for their annual returns from the 2021 year going forward. Information to be disclosed will include: Distributions to beneficiaries both taxable and non-taxable, beneficiary names and IRD numbers and any other information the IRD consider relevant to distributions made. Settlement information which will include the names, date of births and IRD numbers of settlors and trustees will also need to provide the names of settlors from prior years if the information is not already known to the IRD. Information in relation to whom holds the power per the trust deed to dismiss or appoint trustees, add/remove beneficiaries or make changes to the trust deed. Profit and loss statements. Balance sheets. The information as disclosed to Inland Revenue will be used to gain a clear picture of how a trust is being used whether there was any change in the usage of the trust due to the 39% tax rate change for individuals. Inland Revenue holds the power to request the prior 7 years’ worth of information should they deem it necessary. The new disclosure requirements will not apply to non-active or charitable trusts. Minimum Family Tax Credit threshold will increase from $27,768 to $29,432 per annum for the 2020 – 2021 and subsequent years which equates to an increase of $32 per week. As part of the new legislation it has also been clarified that the Commissioner of the Inland Revenue can request information from tax payers to assist with the development of tax policies, however the IRD has advised that a request for additional information will be approached on a case-by-case basis. As part of the government’s Covid-19 response the threshold of low value asset write offs was increased from $500 to $5,000 and took effect on 17 March 2020. This allows for immediate depreciation of assets purchased that cost less than $5,000. We would like to remind tax payers that this concession expires on 16 March 2021, you therefore have limited time to utilise the threshold if any capital expenditure is required. For assets purchased on or after 17 March 2021, the threshold will be permanently increased from $500 to $1,000. The depreciation rates for commercial and industrial buildings which was previously set at 0% has been changed to 2% which is in essence reverting back to a depreciation rate that was available pre-2011. Residential buildings however are not part of the depreciation rate changes, and remain non-depreciable for tax purposes. The reintroduction of depreciation on commercial buildings will help building owners with cash flow in the short term as well as to encourage tax payers to invest in new and existing commercial buildings. The Small Business Cashflow Scheme (SBCS) has been extended to 31 December 2023 and a number of changes have also been made to the scheme (changes took affect 28 January 2021) which are as follows: The loan will be interest free if the loan is repaid within two years, previously it was one year. Limitations on how the loan can be used have eased, the loan can be used for core operating costs and businesses will be able to choose to use the loan to invest in their business to aid the business in adapting to the impact of Covid-19. Businesses or organisations that

For many years New Zealanders have had an affinity with Trusts as an ownership structure. Reasons have included protection from business activity (creditors, business compliance risk etc.), government (taxes or means testing), relationship matters or simply management of wealth to future beneficiaries. There is limited information on the exact number of trusts in New Zealand as there is no formal requirement to record in a register like companies. However the Inland Revenue is gathering more information with all property owning trusts now requiring an IRD number to register the purchase or sale of a property. We see more compliance and monitoring required going forward for Trust Management. Up to now there has been limited formal  legislation to govern the operation of trusts, instead previously relying more on case law decided through court cases. The new Trusts Act 2019, coming into force 30 January 2021, aims to provide legislative guidance for all parties involved with Trusts. With the introduction on the Trusts Act 2019, it is an important reminder for everyone who has set up a Trust to review the; Original Trust deed and any later updates, Trustees, Beneficiaries of the Trust, their classes and rights, Property held by the Trust, Current operation of the Trust in relation to original intentions and in relation to settlors wishes who have/will settle property on the Trust. Are the above points still applicable and relevant? The New Act brings in the concept on Mandatory Trustee Duties and Default Trustee Duties, as well as allowing the potential extension of the Trusts life span. Mandatory Duties will be imposed on all trustee under the legislation and can’t be contracted out of. In broad terms the Mandatory Duties require Trustees; to know the terms of the Trust, act in accordance with these terms, act honestly and in good faith, act for the benefit of the Trusts beneficiaries, or to further the purpose of the Trust exercise powers for proper purpose In discussing Mandatory Duties with clients, common sense prevails with the comment, “That’s what the Trust was set up to achieve.” Default Trustee Duties within the legislation prescribe best practice, however allow the Trustees to contract out of (allow the deed to contain terms contrary to the legislation). Trustees should address their minds to the Default Duties and where necessary expressly modify/exclude these. Examples include; to invest prudently, trustees to act of no reward, to act unanimously, avoid conflict of interest, trustees not to exercise power for self-benefit. In reviewing Trusts with clients, the Default duties often need to be modified to achieve the Trusts original intention.The Life of the Trust (previously the Trust perpetuity period) can potentially be extended from 80 years to 125 years. In client discussions, this may not be a concern of the current trustees, however thought should be given about extending the life of the trust if it is intended to hold equity longer term for multi-generational asset management, or the wish to transfer wealth to the next generation via the Trust. In summary, it is important that a review of your Trust is completed to ensure the Trust is still fit for purpose and achieves it goals within the new legislative framework. If anyone requires assistance with Trust matters, CooperAitken have a specialist in house team focusing on Trust Administration, Trust management and recommendations for updating your trust in regard to the new legislation. We are happy to discuss Trusts with our clients and non-clients, for a set fee. Please contact us on Trustsact@cooperaitken.co.nz. DOWNLOAD A PDF COPY   Grant Eddy, Director P: 07 889 7153E: grant@cooperaitken.co.nz 

WHAT IS TERMINATION PAY? Termination pay is another name for the final payment an employee receives when their employment ends. It differs from regular pay because it includes: Any time worked since the last pay period. Any leave entitlements owed to the employee. Any other contractual benefits such as notice periods or redundancy compensation. Any other agreed payments, such as a bonus or commission. It is paid on their last day of work, or no later than the next pay period from the actual termination date. An employment agreement will usually state when termination pay needs to be processed, so it’s best to check and confirm. TIPS TO STAY COMPLIANT WHEN CALCULATING FINAL PAY Before we get into the calculations, here are three tips to get you started. Review the employee’s employment agreement. Keep an eye out for anything that’s non-standard to make sure you’re not breaching any contractual obligations. Some of the less common entitlements you might come across are long service leave and redundancy compensation but benefits can vary between companies. Determine whether an employee has worked more or less than 12 months for your organisation. It’s important to make this distinction as it will impact how termination pay will be calculated. Include a breakdown in the employee’s final payslip. This demonstrates compliance and shows the employee that their final pay is accurate. They will also feel confident that they’re receiving all their entitlements. HOW TO CALCULATE LEAVE ENTITLEMENTS Employees that have worked for less than 12 months: If an employee has worked for less than 12 months, the calculation is straightforward. They should be paid 8% of their gross earnings since they started employment, minus any annual leave that was taken in advance or paid on a pay-as-you-go basis. You’ll also have to pay out any contractual benefits owing. Employees that have worked for more than 12 months: For someone that has worked longer than 12 months, it gets a little more complicated. In this case the employee’s leave entitlements will be made up of three things: Any annual leave entitlement owing Any public or alternative holidays owing Any annual leave accrued WHAT IS ACCRUED ANNUAL LEAVE? Accrued annual leave is the leave someone earns up until they get their full four-week entitlement. The Holidays Act 2003 states that employees only become entitled to their four weeks of annual leave every 12 months, so accrued leave is a useful tool to show you how your employees are progressing towards their full four-week entitlement. Imagine someone has worked in a role for 18 months. If their employment ended at this point, they would receive their four week entitlement at 12 months, and effectively six months of accrued leave in their final pay. Any annual leave they had taken in advance would be subtracted from their leave balance. HOW TO CALCULATE ANNUAL LEAVE ACCRUAL FOR FINAL PAY Let’s break this calculation down into four steps: Calculate the employee’s gross earnings from when they last received their annual leave entitlement to the date their employment ends. Add the value of any unused annual leave, public holidays and alternative holidays owing to these gross earnings. Work out 8% of this sum Subtract any annual leave taken in advance or paid on a pay-as-you-go basis SOMETHING TO LOOK OUT FOR…. On termination, an employee’s final day of work is notionally extended by any annual leave entitlement not taken. This is to determine if an employee is entitled to public holidays that fall within this extended period. It has nothing to do with notice periods and is different from the date on which the employment agreement is terminated. This means that if an employee had three weeks of annual leave owing, an employer would need to add three weeks to the employee’s end date. If a public holiday fell within this three-week notional extension, and the employee would normally work on that day, the employer would need to account for the public holiday in the employee’s final pay. WHAT ABOUT REDUNDANCY? When it comes to redundancy, it’s essential that a valid workplace change process is followed. Here is a breakdown of the key steps all employers should complete before making an employee redundant: Create a business case for the proposed redundancy. Ensure this is supported by accurate and relevant evidence. Document your business case and present it to the employee with all potential options in a workplace change proposal. Give the employee an opportunity to consider the proposal, seek advice and have their say. Genuinely consider any feedback the employee provides. Make a business decision and present it to the employee in writing. DO YOU HAVE TO PAY REDUNDANCY COMPENSATION? There is no legal obligation to pay redundancy compensation to an employee. However, compensation may be agreed on in the employment agreement. Your payroll team will need to know exactly what is in the employment agreement to accurately process final pay for redundancy. Tip: Employees will still be entitled to work, or be paid, their notice period, even if they aren’t entitled to redundancy compensation. If you want to pay out some or all the employee’s notice period, you should first check to see what the notice period is in the employment agreement and whether it allows for the notice period to be paid in lieu of notice. WANT TO KNOW MORE? Termination pay is a particularly tricky topic as there can often be emotions involved and this can push payroll to the side. However, it’s important to keep payroll top of mind when considering any kind of termination. If you have any questions about final pay or what the Cooper Aitken Wages Team can do to make your payroll even easier, please get in touch today, as we would love to help you! Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.