When managing farm operations, deciding how much to pay family members engaged in farm work can be a challenge.

The hours are probably more flexible, but remuneration is often salaried and the hours long. Unfortunately, the family work schedule is more aligned to being self-employed, rather than a 40 - 50 hour week. Because they are family, there can be more of an expectation that you work until the job is done. Weekends and public holidays are worked, especially as family don’t typically get paid time and a half. This becomes difficult when working out how much to pay family. This becomes even more complicated when there are unspoken expectations regarding farm succession. Those working on the farm may accept below market remuneration on the implied basis that they will inherit the family farm. Sometimes this works, but with high farm values relative to economic returns, non-farming siblings are less willing to accept a significantly reduced inheritance because another sibling worked on the farm at a reduced wage, or to make the succession stack up financially. It becomes difficult to bridge this chasm between the farming and non-farming siblings. Understandably farming siblings may believe they have should receive a greater entitlement to the farming business, but has this been discussed with the parents or their off-farm siblings?. It may not be considered if the remuneration package is at fair value, and hours worked or leave taken are not recorded.

Farming profitability and debt can make it difficult to pay a fair market wage, and this is often encouraged by professional advisors who recommend that drawings and family wages are kept down for the ‘greater good’ of the family business. Reduced wages and drawings means more money is available for debt servicing, maintenance, development and business expansion. There can also be challenges encouraging farmowners to pay a fair market wage to their adult children when this results in wages greater than the parents’ drawings. This becomes a good package when you include a house at a below market rent, home kill meat, the farm ute, power, telephone, insurance, farm clothing and access to the Farmsource or Farmlands card.

However the remuneration returned to IRD based on cash wages and accommodation will seem below the market average, and the additional perks of the job on the family farm can be taken for granted. Sometimes there is also pressure to keep wages low to ensure eligibility to WFFTC and other government support.

If lower wages are paid, the amount of family assistance received can be significant. Federated Farmers publish an annual farming remuneration survey that is a great reference document for establishing what fair pay looks like. It looks at national and regional remuneration (cash and non-cash), hours worked and job roles.

It is also worth calculating and discussing the value of total remuneration package. By the time the additional perks are added such as meat, utilities and vehicles, there could easily be an additional $30,000 of benefits received. The remuneration process needs to become more transparent in the same way that it occurs with non-family employees. Siblings don’t want to discuss what they are paid, and it is difficult to compare wages between on farm and off farm employment.

Although these can sometimes be difficult topics to discuss and have a very personal element to them, the key is to make sure everyone is talking, and open discussions are being had by all involved.

Ensure you’re up to date before filing your EOFY returns.

#1: Income tax thresholds

Effective from 31 July 2024, personal income tax thresholds changed. Composite rates to account for this applied for the income year to 31 March 2025.

- 10.5% applies up to $15,600 (previously $14,000)

- 17.5% applies from $15,601 to $53,500 (previously up to $48,000)

- 30% applies from $53,501 to $78,100 (previously up to $70,000)

Check your payroll systems have reflected the composite rates applying from July, to ensure there are no surprises in terms of incorrect PAYE deducted. Double check your systems are set up for the new marginal tax rate thresholds applying from 1 April 2025.

#2: Fringe Benefit Tax (FBT)

With the changes to income tax thresholds, FBT rates also change, with effect from 1 April 2025. If you provide benefits to employees, review your FBT reporting processes and ensure you’re set up to account for the changes.

#3: Resident Withholding Tax (RWT)

RWT rates were also adjusted in line with the new personal tax thresholds as of 31 July 2024. If your business handles interest payments or other transactions requiring withholding tax, check you are using the correct rates.

#4: Independent Earner Tax Credit (IETC)

If you’re a sole trader earning between $24,000 and $70,000, you may qualify for the IETC, which could lower your overall tax liability. Check your eligibility before filing your tax return.

Get in touch if you have any questions - we’ll guide you through it.

Avoid these common mistakes to keep your tax season on track

Avoid these common mistakes and keep your tax season on track.

Mistake #1 – Neglecting your home office details

If you’re claiming home office expenses, accuracy is key. You might have started the year tracking everything diligently, but it’s easy to let those habits slide. Now’s the time to catch up — don’t leave it until the last minute. Gather your utility bills, rates, phone plans, and other relevant expenses, and plug them into your home office expense chart.

Mistake #2 – Forgetting asset invoices

Have you bought a new vehicle, tractor, or other equipment this year? Save those invoices! We need them to update your asset register and calculate accurate depreciation claims.

Mistake #3 – Skipping your odometer reading

Do you use a vehicle for work? Record your odometer reading on 31 March to track your total business and personal kilometres for the year. This is especially crucial if you’ve driven more than 14,000km, where Inland Revenue’s Tier 2 rates apply.

Mistake #4 – Not flagging Xero/MYOB uploads with your accountant

If you upload invoices into Xero or MYOB, let us know. This simple step can streamline the process and potentially reduce your accounting fees.

Mistake #5 – Confusing deductible expenses

Food, drinks, travel — what’s deductible and what’s not? The rules vary depending on whether you’re self-employed, a shareholder, or trading as a company. Check Inland Revenue’s guide on [entertainment expenses] (https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-expenses/entertainment-expenses) to avoid surprises.

It’s common for farmers and their employees to sit down with a cold beer or a drink at the end of the day or week and chew the fat. It’s when they can have a casual debrief and plan for the following day. This is normally done outside the farmhouse due to everyone still being in dirty work clothes. Its on the deck, at the workshop or in the garage. Essentially, it will be close to the beer fridge. After the problems of the world are solved, upcoming work is planned, jobs allocated, and everyone goes on their way.

When processing a client’s GST or annual accounts, the treatment of alcohol can be problematic. It could be a business or private expense. All clients are different, and how they choose to entertain varies. It’s a fact specific bit of coding, but we need to be careful about ringing clients to query every alcohol purchase they make as this isn’t a good look. We can’t just assume that every alcohol purchase from the local bottle store is business related. However, if it’s a genuine business-related expense, we should be claiming it. But how do we tell this as we do not know when the alcohol is being consumed, by whom, and in what circumstance. All we can see from the invoice is that a box of beer was purchased.

Are you keen to discuss your personal or small business queries in a face to face appointment with IRD?

 Franklin Family Support Services have representatives from IRD in their office in Pukekohe each second Wednesday of the month. If you think you or your business could benefit from an in person meeting you can contact with Franklin Family Support Services directly

Minimum wage is increasing from 1st April 2025

As a business owner or manager, you need to be ready for the minimum wage rates increase from 1 April 2025.

The details of the increase are:

• Adult minimum wage will go up from $23.15 to $23.50 per hour.

• Starting-out and training minimum wage will go up from $18.52 to $18.80 per hour.

• All rates are before tax and any lawful deductions, for example, PAYE tax, student loan repayment, child support.

If you have not yet talked to your accountant, payroll provider or your finance/HR teams now is the time. It is also an opportunity to check your employment records, processes and systems are current.

Read about types of wage rates, exemptions and more here:

Minimum wage

How to prepare for the increases

1. Advise the team

If you have employees on the minimum wage, let them know about the increase they will be getting. You should send them a letter or email (variation of employment contract) advising them of the new wage.

2. Check your payroll systems and processes

Make sure your payroll provider, accountant, lawyer, HR, or finance people are ready to implement the change.

If your system is manual or computer-based, you should check and confirm the settings will be adjusted for the new rates.

If any of your employees are on starting-out or training wages, now is a good time to check when they will be eligible to move onto the adult rate.

If any employment agreements (contracts) are not current or you did not give one to your employees, now is an ideal time to discuss with them in good faith. Update the contract with any terms and conditions that were agreed to by both parties before the contracts were last reviewed. Make sure they include all the mandatory clauses a contract should have by law. Another useful tool is the employment agreement builder if your employees do not have one.

Creating an employment agreement

3. Employee pay relativity

You may also wish to consider potential impacts on your business due to internal wage relativity and external benchmarking. For example, how employees are paid compared to each other, and how your pay rates compare to others in your industry or sector. Employees on higher wages may want to negotiate a pay increase to keep the relative difference.

4. Update your business budget

You should add any expected increased costs to your short and medium-term budget forecasts. This will help you plan for and manage the effect of higher wage and holiday pay liabilities.

5. Upskill on minimum wage obligations

Now is also an ideal time to ensure you know the details around the minimum wage, including that:

• it applies to all hours worked, unless both parties agree to a higher rate in the employment agreement

• it applies to employees paid with a salary or piece rates or commission.

Note the minimum wage does not apply in some situations including:

• employees under 16 years of age

• where a Labour Inspector has issued a minimum wage exemption permit to an employee who has a disability that limits them carrying out their work.

Understanding Overdrawn Current Accounts: A Simple Guide

For many company directors and shareholders, the term "overdrawn current account or Drawings Account" can be confusing. Let's break it down in simple terms to help you understand why it's important.

What is an Overdrawn Current Account?

Think of an overdrawn current account like a loan from your company to you. It's not the same as a salary. When you take money from the company without it being officially recorded as a salary, it becomes a loan that you owe back to the company. This is important because it shows up as a debt on the company's balance sheet in the year-end Financial Statements.

The shareholder current account is overdrawn at balance date when the amount withdrawn for personal use exceeds the amount introduced and the profit allocated to shareholders. An overdrawn current account incurs interest charges at specific rates deemed each year by the IRD.

Why Does This Matter?

If your company ever faces financial trouble and goes into liquidation (meaning it can't pay its debts and has to close down), liquidators will look for ways to recover money. An overdrawn current account is one of the first things they target because it's easy to identify. They might even freeze your personal assets, like your home or bank accounts, to make sure they can get the money back.

A Real-Life Example

Imagine a director who had taken $400,000 from their company over several years without declaring it as a salary. When the company went into liquidation, the liquidators quickly moved to freeze the director's personal assets to ensure they could recover the money. This is a common approach and can be very stressful and costly.

What Can You Do?

To avoid these problems, it's important to get advice from us on ways to limit risks before any trouble arises. We can help you understand your current account and suggest ways to manage it better. For example, you might decide to officially declare the money as a salary, which could mean paying some extra tax but would prevent bigger issues down the line.

In short, understanding and managing your overdrawn current account can save you a lot of hassle and protect your personal assets. It's always better to be informed and prepared!

When companies close over Christmas, there are plenty of security issues to consider, including ram-raids, theft, and vandalism targeting New Zealand businesses.

- Before you close, ensure all doors and windows are locked, shutters are down, and consider investing in a security alarm system (it could make all the difference).

- Use lighting to your advantage. As thieves like to commit crimes under cover of darkness, sensor lighting can deter them at the door. Keep lights on timers to give the appearance of an occupied space. It could make criminals think twice.

- If you keep valuable equipment on site, paying for a professional security service could be a worthwhile investment.

The season of giving is on us. While the fun part is thinking about parties and presents, take a moment to remind yourself about the tax rules.

If your Christmas giving includes gifts to clients, remember that some gifts will be fully deductible while others will be only 50% deductible.

The rule of thumb with gifts is that if they consist of food or drink, you can only claim 50% of the expense as a tax deduction. If you are giving out gift baskets or hampers and some of the contents are food or drink, but not all, the food or drink items are 50% deductible, but the other gift items are 100% deductible. When you come to claim the tax deduction, you will need to apportion the expense between the 100% deductible items and the 50% deductible items. And you will need to make a GST adjustment for expenses which are 50% deductible.

Examples of gifts which are 50% deductible include:

- Bottle of wine or six pack of beer

- Meal voucher

- Basket of gourmet food

- Box of chocolates/biscuits

- Christmas ham

Examples of gifts which are 100% deductible include:

- Calendars

- Book or gift vouchers

- Tickets to a rugby game (but not corporate box entertaining)

- Movie tickets

- Presents (but not food or drink)

Call us if you’d like to check the tax treatment of your plans for this season’s gift-giving.

It’s the perfect time to reflect on achievements and improvement opportunities for the year ahead - so you can set some SMART goals

As more businesses embrace online solutions, eInvoicing is changing the way invoices are managed across New Zealand. Launched a few years ago, eInvoicing simplifies the exchange of invoices, allowing them to be sent and received directly within your accounting software.  Currently there are over 23,000 businesses in New Zealand registered for eInvoicing.

With eInvoicing, you’ll enjoy:

• Direct Delivery to Xero: Invoices arrive straight into Xero as draft bills, eliminating manual data entry.

• Reduced Errors and Faster Payments: Automated entry minimises human error, helping you get paid faster.

• Enhanced Security: Peppol ensures that invoices are transmitted securely, reducing risks compared to email or PDFs.

Christmas means many things to many people but for business owners it can mean disruptions to cash flow. Take some simple steps to manage it and save yourself a headache going into the new year.

Christmas can cause a cash flow crisis for small businesses, but you can prevent problems from spilling into the New Year:

- Get your invoices out early. Ensure December and January invoices go out well before Christmas to give your customers the chance to pay before the break. Encourage customers to pay before Christmas if they are closing over summer.

- Chase up your invoices. Don’t let unpaid invoices linger over summer. Politely ask your customers to settle overdue bills before the break to prevent further delays.

- Plan for incoming invoices from suppliers. You'll be on their list to call as well.

- Consider your tax obligations for both December and January! We know you'd rather be on the beach on 16 January but don't let your tax due dates slide.

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.

  * Annual holiday entitlement does not expire; staff are entitled to their holidays until they take them. Only one week's leave per year may be cashed up and only with your consent

* Businesses need to be reasonable in considering requests; you can't unreasonably refuse an employee who wants to take annual leave

* However, employers can decline unpaid leave requests or advance holiday requests.

* You can only require an employee to take a holiday if you can’t agree on when leave should be taken. In this event, staff need 14 days’ notice.

* A business can’t make an employee take their annual holiday in advance, except when the company has an annual closedown

Heard of the five ways to Wellbeing?

They are simple and proven actions you can introduce in your workplace to help staff find balance, build resilience, and boost their mental health and wellbeing.

Digital Snapshot: Two useful tools to help with bookings and payroll

Managing your team involves understanding your legal obligations. Here's a simple rundown of the key employment responsibilities under New Zealand law

Back to Basics

Under New Zealand law, employers must:

• Give all employees a written employment agreement/contract

• Pay employees at least the minimum wage for all the hours they work

• Pay employees in cash (money) unless they have agreed to a form of direct credit

• Not deduct money out of employees' wages unless the law allows it (such as for student loan payments) or an employee gives written authorisation