Search:

Grant Thornton New Zealand’s latest survey of over 200 business leaders and decision makers has revealed a significant uptick in optimism for the coming year despite many toughing it out in current economic conditions.

Greg Thompson

| 9 min read | 29 Apr 2024

Grant Thornton New Zealand’s latest survey of over 200 business leaders and decision makers has revealed a significant uptick in optimism for the coming year despite many toughing it out in current economic conditions.

Greg Thompson

| 6 min read | 29 Apr 2024

You know you can’t work forever – and you certainly aren’t immortal. But plenty of business owners are living as though they’re completely infallible.

Greg Thompson

| 18 min read | 26 Apr 2024

It’s free, it’s easy, and it will immediately start saving you time. E-invoicing is a fantastic tool for any business. Plus, it could protect you from being scammed out of significant sums of money.

To meet your tax compliance requirements for the financial year end 2022, you need to complete an information questionnaire and send it back to us along with any required documentation. You can return your form using one of two methods - print and post or email.

There’s new GST legislation in place for online marketplaces, which includes short-term accommodation platforms like Airbnb, ride-sharing platforms like Uber and delivery services like Uber Eats. These online platforms must now collect 15% GST and return it to Inland Revenue. This ‘app tax’ came into effect on 1 April 2024, and it’s already having an impact on the market.

Matt Hannah

| 20 min read | 11 Apr 2024

The success of an acquisition largely hinges on the price paid relative to the value received. To ensure success, it’s crucial to gain a comprehensive view of not only the quality of earnings of a business but also the quality of the reporting itself. If you’re an investor performing due diligence, here are five key considerations about the quality of the target’s financial reporting.

Richard Hughes

| 10 min read | 04 Apr 2024

The External Reporting Board (XRB) has released updated reporting thresholds for public benefit entities (PBEs): Tier Old criteria New criteria Tier 1* Total expenses greater than $30m Total expenses greater than $33m Tier 2 Total expenses less than $30m Total expenses less than $33m Tier 3 Total expenses less than $2m Total expenses less than $5m Tier 4 Total operating payments $140,000 No change *Note; an entity is also required to apply Tier 1 if it has “public accountability”. This decision is welcome as many PBE entities will see a reduction in reporting requirements and compliance costs. These thresholds have not been updated since 2012; in that time, various new pieces of legislation have been introduced and inflation has pushed many entities from Tier 3 to Tier 2 reporting without becoming any larger or more complex. Several new PBE standards have also been issued over the last decade, causing concerns that the costs of reporting exceeded the benefit to users under the previous size thresholds. Research by the XRB on the expenditure of PBE entities shows there is substantially less clustering around the $5 million threshold, compared to the $2 million threshold. In total there are 33 entities with total expenditure between $4.8 million and $5.2 million, while there are 115 entities with total expenditure between $2.8 million and $3.2 million. When does this change apply? The new thresholds are mandatory for periods beginning after 28 March 2024, which impacts 31 March 2025 balance dates onward. However, the change can be applied for periods that end after the standard takes effect (28 March), so those preparing reports for 31 March 2024 balance dates onward are also eligible. This news is timely for Incorporated Societies applying XRB PBE reporting standards for the first time under the Incorporated Societies Act 2022, as more Incorporated Societies will also now have lower reporting requirements. Determining your expenditure Total expenses for the purpose of determining a reporting threshold include all of an entity’s operating expenditure. This includes grants or donations made by an entity, but does not include capital expenditure (assets) or loan payments. How does it work in practice? If you now find yourself eligible to apply a lower reporting tier due to this change, it can be implemented immediately. However, you need to consider future expenditure as you may end up transitioning back quickly if this grows year on year. It’s also important to think about consolidation requirements if your entity sits within a group, so that a change in reporting tier at the entity level doesn’t interfere with group reporting. PBEs can apply requirements of a higher tier if they want to, so if you are happy to stay at the current reporting tier – that’s fine. For example, we have seen this with recently established PBEs that knew they would exceed the previous $2m expenditure threshold in future years, so they start by adopting Tier 2 rather than waiting until they hit the threshold. If your PBE previously applied Tier 1 requirements and you are transitioning to Tier 2 requirements due to your expenditure, the recognition and measurement accounting policies will remain the same, but there will be less disclosure requirements in the notes to the financial statements. Tier 2 and Tier 3 reporting requirements have some differences, mainly around presentation of revenue and expenses, and accounting for property, plant and equipment, investment property and publicly traded financial investments. Entities that previously applied Tier 2 requirements and are transitioning to Tier 3 can choose to either provide comparative data in accordance with Tier 2 requirements (i.e., leave it as it was) or restate them in line with Tier 3. If your entity is thinking about transitioning reporting tiers, start engaging in the process early so you can navigate this transition which can be deceptively complex at times.

Barry Baker

| 15 min read | 21 Mar 2024

There’s been a period of relative calm in the world of accounting standards in recent years, however they quietly continue to evolve and reflect the dynamic nature of business, and the need for transparency and accuracy in financial reporting. Recently, several important changes have been made to New Zealand equivalents to International Accounting Standards (NZ IAS) to make financial statements clearer, comparable and relevant. Key updates have been made to: 1. material accounting policies for year ends from 31 December 2023 onward 2. accounting for estimates for year ends from 31 December 2023 onward 3. the presentation of current and non-current liabilities for year ends from 31 December 2024 onward Understanding the implications and significance for your business Changes to NZ IAS 1: Disclosure of material accounting policies A shift from the significant to the material The amendment to NZ IAS 1 emphasises the disclosure of material accounting policies. It requires entities to make material accounting policies prominent and easily accessible within financial statements. Previously, businesses were only required to disclose their significant accounting policies. The move to releasing material accounting polices was made to reflect the fact that term and its application is described in detail in accounting standards, where the term significant is not. How will this benefit my organisation and its stakeholders? Transparent disclosure of accounting policies is crucial for stakeholders to comprehend how financial information is prepared and to assess the reliability of financial statements. By explicitly stating material accounting policies, companies provide clarity on significant judgments and assumptions applied in financial reporting, enhancing the overall transparency, trustworthiness and comparability of financial statements for different entities. Investors and other stakeholders can make more informed decisions when they have a clearer understanding of the underlying principles and methodologies used in financial reporting. It encourages companies to critically evaluate their accounting policies, ensuring they accurately reflect the economic substance of transactions and events. Businesses are encouraged to review the significant accounting polices previously disclosed to determine how they stack up against the new guidance to disclose material accounting policies. Changes to NZ IAS 8: Accounting for Estimates More consistency and reliability on the horizon The revision to NZ IAS 8 addresses the accounting for estimates, emphasising the need for consistency and reliability when estimating uncertain future outcomes. Over time, a change in accounting estimates has become confused with a change in accounting policy. The amendment replaces the definition for a change in accounting estimate with the definition for an accounting estimate as monetary amounts that are subject to measurement uncertainty. Enhance the usefulness of your financial statements … Estimates play a crucial role in financial reporting, particularly in areas such as fair value measurements, provisions, and impairment assessments. Ensuring the reliability and consistency of estimates turns your financial statements into a tool stakeholders can use to assess the potential impact of uncertainties on an entity's financial position and performance. … And mitigate risk The revised standard prompts companies to exercise greater diligence and transparency when making and disclosing estimates. By providing insight into significant judgments and uncertainties, you can mitigate the risk of misinterpretation and enhance stakeholder confidence in the reliability of your financial information. Additionally, it encourages robust internal controls and processes for estimating, monitoring, and disclosing uncertainties, all of which improves risk management practices. Changes to NZ IAS 1: Presentation of Current and Non-current Liabilities What is changing? The amendment to NZ IAS 1 focuses on the presentation of current and non-current liabilities, requiring a liability to be classified as current if, among others, the company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. The amendments to NZ IAS 1 clarify that the right to defer settlement must have substance, and it also discusses the impact of covenants on this assessment. Why is this important? Clearly presenting your current and non-current liabilities makes your liquidity and solvency position easier to understand. By segregating liabilities based on their maturity, financial statements provide valuable insights into an entity's short-term obligations and its ability to meet them, which helps stakeholders assess liquidity risk and financial health. The amendments state that at the reporting date, instead of considering covenants that will need to be complied with in the future, when considering the classification of the debt as current or non-current, the entity should disclose information about these covenants in the notes to the financial statements. The standard setter introduced these so investors can understand the risk that such debt could become repayable early and therefore improving the information being provided on the long-term debt. What is the impact on my business? The revised standard prompts entities to reassess their classification of liabilities, ensuring compliance with the new presentation requirements. By clearly delineating between current and non-current liabilities, businesses enhance the clarity and relevance of financial statements, enabling stakeholders to make more informed assessments of an entity's financial position and performance. It underscores the importance of effective liquidity management and strategic planning to meet short-term obligations and sustain long-term growth. What’s next? After a period of relative calm, we are expecting to see a minimum of two new accounting standards over the coming year. The first, IFRS 18, will impact the representation and disclosures of primary financial statements. Key changes include: • new required subtotals included in the statement of profit or loss such as operating profit, profit before financing and income taxes, • disclosures around management-defined performance measures (MPMs), and • enhanced requirements for aggregation and disaggregation (i.e., grouping of information). It is important to note that IFRS 18 is subject to consultation before the standard is adopted in New Zealand. We are also anticipating a new standard outlining disclosure requirements for subsidiary, and potentially other entities, who do not have obligations to produce financial statements. When and how this standard might be applied in New Zealand will be subject to XRB consultation.

David Pacey

| 10 min read | 20 Mar 2024

When you take a sip from a 330ml bottle of Speight’s Gold Medal Ale, you probably don’t consider the 47c in excise tax that was included in the price. And why would you? It would only take the fun out of having a nice cold beer. Unfortunately, if you run an alcohol business in New Zealand, you don’t have the luxury of forgetting about excise taxes. These have risen rapidly in recent years because they are benchmarked to consumer inflation. The rise over the last three years in the consumer price index to as high as 7%, has meant more than $94 million in additional excise tax for the alcohol industry. On top of that, the industry has had to absorb rising ingredient and packaging costs, skills shortages, falling sales and higher interest rates. It’s tough going for our alcohol manufacturers and distributors, many of whom are small privately owned and family businesses. While this is an area of tax legislation that might only affect a small number of businesses, it has a sizeable impact. It’s a challenge to be accurate and compliant, particularly for the smaller craft producers that make up around 10% of our local market. These inaccuracies are an under-recognised issue - get it wrong, and it can be extremely costly. Overpaying could lead to significant unnecessary costs Producers must record alcohol volumes accurately, have correct sales records, and lodge that data by the deadlines set by the New Zealand Customs Service. Because brewing is an art and a science, the level of accuracy required can be tricky to achieve. It’s not uncommon to see brewers make tiny errors that lead to big consequences, and the last thing anyone wants is to be facing thousands of dollars a month in unnecessary tax. It’s also easier to make errors at a smaller craft operation, because it’s less industrialised when compared to the big players like Speight’s or Heineken. Take, for example, a fictitious beer manufacturer – let’s call it Bottle Brewery. One of its best-selling beers is a light lager that should have 4% alcohol by volume (ABV). Unfortunately, the team at Bottle Brewery isn’t equipped to be 100% accurate with its calculation and processes. As a result, its light lager has been leaving the brewery with an ABV of 4.08%. That might sound like nothing more than a rounding error, but it’s just enough to increase the excise tax on the beer. The corresponding increase gets applied across the stock keeping unit (SKU) based on sales per month, and the light lager is selling well, shifting 100,000 units in a month. Applying the additional excise tax adds an extra $2,800 per month for that alcohol SKU alone. Plus, the Bottle Brewery team is a bit slow at filing its returns. With that late fine, and the extra excise tax, the company is unnecessarily paying $3,600 a month. Hopefully Botte Brewery has been more accurate with its other beers or its taxes could be really adding up. Underpaying can be a nasty shock When you’re underpaying tax, you run the risk of an unpleasant shock when you need to backpay the outstanding amounts. Customs carries out regular inspections of New Zealand’s alcohol businesses, walking through production facilities to see how you’re recording your alcohol volumes, checking your systems, and inspecting your reports and declarations. Inspectors will look at everything, even checking to see whether you have alcohol sitting in unlicenced areas of your property – you may need to pay excise tax on it if that’s the case. At a time when niche brewers have been struggling to stay afloat, investing in getting this right is well worth the effort – because the costs of getting it wrong can be disastrous. If Bottle Brewery has been paying its excise tax assuming its light lager is 4%, but Customs discovers it is actually 4.08%, the business may be on the hook for several months of backdated taxes. This could be a considerable cashflow blow for a small brewery that’s already feeling the headwinds of tough economic conditions. It may even face penalties for mistakes or omissions, on top of any tax owed. If Customs decides to do a full audit, that will also take up extra time and resources they can’t afford. Customs is very responsive and helpful, and they do have options under the legislation to remit penalties and offer time to pay arrangements. However, they don’t always have the ability or appetite to offer lenient repayment options, and outstanding excise tax and penalties may need to be paid. The right systems and processes can save you time and money Most breweries use spreadsheets to track their sales and alcohol volumes. Academic research has found that an estimated 94% of spreadsheets contain errors, which shouldn’t fill anyone with confidence. Breweries need to develop and maintain a laser focus on improving the quality of their data, and developing models that help them improve accuracy and file returns on time. Typically this investment quickly pays for itself, often simply by avoiding late filing fees. Improving systems and processes often leads to other increased efficiencies throughout the business, including better stock storage practices and more precise forecasting. When it comes to excise tax reporting, a millilitre of prevention is worth a fermenter full of cure.

Iain Blakeley

| 7 min read | 19 Mar 2024

Grant Thornton’s latest report, "Pathways to Parity: 20 Years of Women in Business Insights ", marks two decades of dedicated research aimed at monitoring and measuring the representation of women in senior management roles within mid-market companies worldwide.

Stacey Davies

| 20 min read | 07 Mar 2024

Update for Cryptopia Claimants and Stakeholders 5 March 2024

Update for Cryptopia Claimants and Stakeholders 5 March 2024

Update for Cryptopia Claimants and Stakeholders 20 February 2024

Update for Cryptopia Claimants and Stakeholders 20 February 2024

This publication is designed to give preparers of IFRS financial statements a high-level awareness of recent changes to International Financial Reporting Standards. It covers both new Standards and Interpretations that have been issued and amendments made to existing ones.

David Pacey

| 8 min read | 07 Feb 2024

Grant Thornton is trialling a nine-day fortnight in what is believed to be a first for the professional services industry in New Zealand. The trial launched on 1 January 2024, and will see staff working for nine days but paid for 10.

With hopes Covid is now somewhat in the rearview mirror, the pace of change in the transfer pricing space has not slowed down. The OECD continues to drive the base erosion profit shifting (BEPS) programme to minimise tax competition among jurisdictions and ensure multinationals pay their fair share. However, the effectiveness of the programme’s final stages depends on the willingness of countries to implement and enforce these rules consistently. It remains to be seen how tax authorities worldwide will adapt to these changes and if a new era of cooperation will indeed emerge in the global tax landscape. However, with economies around the world still in or coming out of recession, there are questions around whether the 142 countries that have signed up to the BEPS framework remain committed to such a unified approach, or if there will be a shift to a ‘every jurisdiction for themselves’ mentality. As some economists have indicated, there are signs certain economies are shifting away from a focus on globalisation to looking inward and more national economic protectionism. What does this mean for New Zealand-based multinationals? There seems to be a stand-off between countries waiting to see who will jump first. In the meantime, some have implemented the needed regulations, while others – like New Zealand - have also hedged their bets and have legislation waiting as a backup, as demonstrated by the introduction of the digital services tax laws brought in by the Labour Government. The current National-led Government is yet to confirm if this will remain, be repealed, changed or trumpeted, but it has increased resources for Inland Revenue to expand its audit capacity, minimise taxation losses and ensure greater integrity and fairness in our tax system. And it’s likely there will be heightened proactivity in this space so the Government can collect the extra revenue needed to deliver on its election policies. This means change for multinationals could be on the way, and transfer pricing rules may be an area in which Inland Revenue increases audit activity; this may also not be limited to the tax authority of New Zealand but others around the world. The key for potentially affected Kiwi businesses will be to: · review their New Zealand and global transfer pricing policies to ensure they remain fit for purpose · establish suitable governance to implement these policies appropriately · keep management up to date with changes in the transfer pricing space. Countries will be weighing up the benefits of a unified approach against the temptation of self-interest, while businesses grapple with economic uncertainties and transfer pricing rules which will continue to change. As New Zealand and other countries await international unification, internal pressures will continue to mount, setting the stage for a complex interplay between economic recovery, taxation, and the delicate dance of international relations.

Sam O'Connor

| 3 min read | 21 Dec 2023