Edition 2: Smart Money Newsletter 2010 Winter
  Go to Edition 1   Go to Edition 3

Welcome to our second edition of Smart Money! This newsletter is designed to give you updates, reminders and tips relative to the upcoming season for your finances and well being.

In this season’s newsletter we have:

Tax, tax and more tax: Do you need to do a return? Could you be due a refund? Do you need to change your PIR tax rate? How to negotiate with IRD, How to lower your tax bill….
Kiwisaver: Do you need to be in it? What if you work for yourself?
Full Balance Coaching News: New staff
Yearly Updates: Use the template and do it yourself
Newsletter ideas?

1. Tax, tax and more tax….

The end of the tax return for most of us, March 31st has been and gone, so if you haven’t updated your tax or done your return now is the time. If you do your returns yourself, they need to be in by July 7th - Yes that is a couple of weeks away. If you get your accountant to do them, they are not due for ages, but still good to get everything out of the way now, before it becomes a distant memory and you can’t remember what’s what!

If you want to do your tax return yourself (only recommended for sole traders and individuals), FULL Balance can coach you through completing your return, give us a ring.
Do you need to do a return?
Obviously if you have earned income that you haven’t declared to IRD, yes you do need to do one (even if you made a loss), this includes self employment income, property rent, overseas income etc. The exception to this is if you earned money from a hobby activity where you were not intending to make a profit.

If IRD have sent you a tax pack this means they are expecting you to do a return (usually because you did one last year), but if you can’t get it in on time or you don’t think you need to do a return – ring them otherwise you will probably get a whole lot of late penalty filing charges against your name - $50 a pop each year.

Can I get a refund?

There are many circumstances that you can get a refund, but IRD is not going to be knocking on your door asking you to apply, so sometimes you need to be a bit proactive. You can apply for your refunds for up to 5 years ago, and then it disappears.

You may be due a refund in the following circumstances:

• You only worked part of the year – this means that you probably paid too much tax, as they thought your earnings for the year were going to be more so taxed you at the higher rate. E.g. if you have been out of work during the year or have been travelling.
• Were a low income earner - usually if you were working part time on a low wage
• Made donations to a registered charity and kept your receipts
• If you paid for childcare or a house keeper
• Made a loss from your business or investments as a sole trader or individual
• You qualify for the independent earner tax credit and haven’t declared it to your employer i.e. you earn between $24,000 - $48,000 and don’t receive any extra’s from the government i.e. you don’t have children or claim a benefit

If you want to find out whether you are due a refund without having to file a tax return first or give your details you can do it here http://www.ird.govt.nz/calculators/tool-name/tools-p/calculator-pts-calculator-2010.html

Do you need to change your PIR rate?
No doubt you got a letter from your investment managers about whether you need to change your PIR rate. Make sure you have the right rate, because you won’t get that extra tax paid back! In general if your taxable income was less than $14,000 in either of the last two years then your PIR is 12.5%, between $14,000 – $48,000 then it is 21% otherwise it is 30%. Your Kiwisaver is a PIE investment, so good to check your tax rate if your income has changed since enrolling, especially if you now work for yourself.

How can I lower my tax bill?

Make sure you are declaring all your expenses, including home office (rent, insurance, power, water, rates, phone, mortgage etc), entertainment, mileage, bad debts….! This can have also sorts of benefits such as increasing your Working for Families entitlements, and lowering the amount of money you owe IRD.

If you do have bad debts and need someone impartial to chase them up on your behalf, or want to check which expenses you can claim, give us a call.

What if I owe tax and I can’t pay it?

The IRD are surprisingly negotiable, so don’t just ignore it or you will get lots of penalties and interest added. There is a 1% then 4% upfront penalty when it goes past the due date, then they keep charging 1% a month penalty plus interest at around 8%. However if you negotiate a payment plan they will stop charging the 1% penalty per month, so good to do that sooner or later. If you continue not to pay they can take money from your wages or bank account or take you to court, but this is usually only in extreme cases.

We can help to negotiate with IRD, and any other creditors, and act as your budget advisor if you need us too, to make sure any debt payments are not going to put you under hardship.

2. Kiwisaver

I’m starting to see people build up savings in their Kiwisaver, and it’s a good feeling knowing that you have some money tucked aside. Also in these times of needs, this money can also be called upon if you are suffering hardship. Please let me know if you or someone else needs a Kiwisaver hardship application done.

Do I need to be in Kiwisaver?

A lot of advisors would say you were a fool if you were not, because you will get your money double or even tripled because your employer will match your 2% and the government will match the first $1040, but you may not get the money until you are 65 (if you die before then it goes to your estate).

However there are some circumstances where it may not be in your best interest, mostly when you are under stress and need the cash for something else. So if you are not sure whether you need to be in Kiwisaver, whether to put 2% or 4% in, not sure which provider to join or how to join or which type of investment is for you (i.e. conservative, balanced or growth), give us a ring for an independent opinion.

Kiwisaver and working for yourself

If you are not working or work for yourself as a sole trader, you need to make your own contributions directly to your Kiwisaver provider. You will miss out on the 2% from an employer, but you can contribute $1040 to get that matched by the government, you may want to contribute more if you are hoping to get the first home subsidy (as you had to of contributed 2% of your gross earning to qualify).

The cut off date to contribute to Kiwisaver so it will get matched this year by the govt is 30th June, so if you don’t contribute before then you will miss this year’s entitlement (note if you haven’t joined yet, you are better to wait until after this date, as it is govt contributions are prorated in the first year). Quite important if you are hoping to qualify for the first home subsidy and get your $1040 to get in before that date.

3. Full Balance Financial Coaching News
Templates Available
Want to do your own update of your financial situation, the template are now available so you can track your own progress. Just send us an email to purchase your own copy.
Free Money Personality Testing
This is a great first step for you and your friends to start their financial journey, and can also be a bit of a laugh! Best of all it is free with no obligation. http://www.fullbalance.co.nz/money-quiz-saving-money-feelings-about.html
We now have an extra coach in Tauranga, Sue Newnham. Sue has a wealth of business and life experience and comes to us from a business financial advisory and counseling background. She has a Diploma in Business Studies, Certificate in Counseling, B.A. in Psychology and is a volunteer and certified budget advisor and Lifeline Counselor.

With Sue on board this will give me more time to manage and expand the business.

4. Yearly updates
Yearly updates are really important to keep you on track. Whether you do this on your own or with a coach, it can make all the difference over the longer term between staying in your current rut and getting out and “making” in the world.

The end of the financial year is a great time to review your finances, especially if you are in business.

Email me for a copy of the template if you’d like to review your own finances, or ring me for an appointment if you think you a due for an update.

5. Next Edition
It will be either the end of Winter or Spring for the next update. Please let me know if there are any topics you would like investigated.

Keep warm and healthy till then.
Full Balance Financial Coaching

The information in this newsletter is designed to be for information purposes. The accuracy of the information is not guaranteed and no responsibility is taken for your action based on this newsletter or links contained in it.

 Tauranga & Auckland Budgeting advice, Financial hardship, Independent Financial Advice, Retirement advice

Shula Newland, owner and manager
of Full Balance Financial Coaching, Auckland.

 Tauranga & Auckland Budgeting advice, Financial hardship, Independent Financial Advice, Retirement advice
Freephone 0800 FULL Balance (0800 385 522) - Email: enquiries@fullbalance.co.nz