Welcome to our first newsletter for the 2012 year, and what a year it is going to be! The markets, while still tight, are showing some green shoots, which are starting to filter through. There is positive media comment for the year going forward and our friends at the IRD are awake and looking forward to all the new tax changes coming on stream.


Budgets

I guess most of you have completed or are nearing completion of your budgets for the 2012/2013 year. But in case you haven't, I would offer you some thoughts based on the facts as we currently know them:

The NZ dollar is high, which means if you are completing a sales budget for an overseas market, you may want to factor in some resistance to our exports, because the high dollar will make them more expensive in an overseas market.

Interest costs are expected to continue at a low rate for the rest of this year and if you are considering some capital expenditure and providing the payback is there, this could be a good time to make an investment.

Inflation is expected to remain low for the balance of the year, so when compiling your sales and wage forecasts, you may wish to go back to a zero base and build the revenue and costs up from there. Depending upon the nature of the industry, I would not allow more than 1.0 to 1.5% increases so any increase beyond that must be due to growth, not inflation.

Consumers have modified their behaviour and are looking to save more rather than spend more, so this may impact on the domestic sales.

Commodity prices are holding up well and although the high NZ dollar may hurt us, everyone in the world still has to eat and drink and that is what a large percentage of our exports are all about.

Tax and the 2012 Year

The recession for the last 3 years has meant the IRDs tax take has been hurt and this year we see the introduction of some new measures which means more tax from the same number of people. Is that fair?
So here is a snapshot of some of the changes that you may want to talk to us a bit more about:


You have a one off opportunity, in respect to depreciation to split out 15% of a buildings tax book value as fit out, where you have in the past not seperated the costs for commerical property.

Depreciation rates for all buildings now revert to zero.

If you have residential property that is being leased, just check with us about what now constitutes as part of the building. Awnings for example can now be an asset in their own right and depreciated at 20% diminishing value.

Good old LTC's, there are more issues flowing out of them now than a sieve. Always ensure that if you are in a LTC you have a written contract in place for shareholder remuneration.

The IRD as always has the same policy "once you send your tax return in, it is often difficult to change it" That's the policy of being fair to everyone!!!!

The main thought for this year is to "think positive", no matter how big a problem may be.


Vaughan