Merger with MTM Accounting Limited

We are excited to announce the merger of Dowse Murray Chartered Accountants Ltd with MTM Accounting Ltd from 1 April 2017.

The merger will enable both firms to improve efficiencies and provide a higher level of service to clients.

With the staff of Dowse Murray Chartered Accountants Ltd all transitioning to the new combined firm we expect there to be little practical change for clients with regards to fee and the level of service provided.

The new combined firm will be called MTM Accounting Ltd and will operate from premises at Level 1, 100 Tory Street, opposite Moore Wilsons.

We look forward to continuing to work with you to further improve your business or personal financial activities and if you have any questions about the merger please call us.

Changes to tax deducted from payments to contractors

When announced in the Budget last year this change appeared to be about allowing contractors to choose their own withholding tax rate – within limits.

But as they say the devil is in the detail.

In a nutshell, if you are invoicing an IT services or recruitment company for your contract services then the IT services or recruitment company will be required to deduct withholding tax from all payments to you from 1 April 2017 (even for March 2017 work paid in April). And the default rate is 45%. The new change is that it now affects those contracting through companies.

Sole traders:

If you’re a sole trader the 45% will cover more than your usual tax obligations as the top tax rate is 33% so after you claim your business expenses then you should receive a sizeable tax refund. But you’ll have to wait till year end to receive it.

Details are at

To reduce the amount being deducted you can complete an IR330C form: but the minimum rate you can choose is 10%. The 10% is probably the best option but you may then have tax to pay at year end if that rate ends up being too low . You can calculate a more accurate rate using the IRD calculator at For example:

  • If your income after expenses and excluding GST is around $80,000 then the rate should be 22%.
  • If your income is around $100,000 then the rate should be 24%.
  • If your income is $200,000 then the rate should be 28%.
  • etc;

Remember by using a 10% rate you are deferring the tax you pay, but you end up paying the correct amount of tax based on your earnings in the end.

The other option is to complete an IR23BS. This is a complicated form but will potentially allow you to set the rate that the IT services or recruitment company charges to an even lower rate, depending on your costs and tax losses from other business activities for example, if you have a rental property with large losses.

If you are a sole trader and already have a certificate of exemption from withholding tax that exemption will expire at 31 March 2018.


It all becomes far more complicated if you provide your contract services through a company. By the intermediary recruitment or IT services firm deducting withholding tax, this reduces the amount paid to your company. Effectively then because of the personal services attribution rules the income will be allocated to you at year end but the tax will already have been mostly paid by your company. Meanwhile you still need to pay PAYE during the year on your salary (or provisional tax) and the company will receive a large refund at year end.
Because this doesn’t make sense you can choose a lower withholding tax rate for the company by completing an IR23BS in the company name and setting the withholding tax rate to zero. Otherwise the IT services or recruitment company can deduct tax at 45%.

Special tax code application (IR23BS):

The only other way to reduce the compliance costs of all this extra work and to minimise the real cashflow issues is for you to contract in your own name for those jobs that go through a recruitment or IT services company and just use the company for contracts you obtain directly. And you should expect to pay higher monthly fees to your IT services or recruitment company to cover their additional compliance costs. If the recruitment agency isn’t quite ready to implement these changes, they do have up until 1 July to get their systems set up which may delay things a little for you.

Example: IT Recruitment Co Ltd has agreed to provide web designers for Client Co. IT Recruitment Co arranges for Services Provider Ltd to provide people for Client Co. IT Recruitment Co Ltd is arranging people to provide work directly to clients. As a result, they are in a labour-hire arrangement and this labour-hire arrangement is part of their labour-hire business. As a result IT Recruitment Co Ltd is required to withhold tax at 45% from any payment made to Services Provider Ltd. Services Provider Ltd may apply for a special tax code to reduce its rate of withholding (including applying for a rate of 0%).


Cuba Libre

Having just returned from Cuba a few weeks ago I was delighted to learn yesterday that the 45 day legislative objection period had lapsed without objection, and the US had removed Cuba from its blacklist of terrorist countries, allowing diplomatic relations to be restored as a first step in easing trade and economic sanctions.IMG_3795

Clearly this is going to have huge changes for Cuba and they are in a unique position to choose what changes they want and how they want to change, having observed world progress over the last 50 years. I’m glad I got to see the country before these changes. Cubans secured their independence from Spain in 1898, were boycotted by the US over 50 years ago, and then abandoned by the Soviet Union in 1990 with the break up of the Soviet Union.


For the last 25 years they have operated in a virtual wilderness. This is reflected in the iconic 1950s vehicles that we associate with Cuba. Interestingly these are now being imported from the US as they are a major tourist attraction.

The reality is that most of the cars are that old and many of the buildings are crumbling although the government is working to rebuild some of the classic older buildings, retaining their facades. It also partners with non-US hotel chains to build hotels, particularly in the capital, Havana, to provide for the tourists, a major source of revenue.

Our trip included driving through the country side, on highways with little traffic but lots of horses and carts, while oxen ploughed the fields. Almost everything is homegrown. So when we saw lamb on the menu we asked where they graze their sheep since it is so close to the equator. Apparently their “sheep” have horns and are what we call goats. But lamb is better understood by the tourist so lamb it is.


Our visit to the cigar factory showed rows of people hand rolling cigars – the country produces around 1 million a day. Everything is very labour intensive with locals earning around $US10 a month. Tourists use a different currency aligned with the US dollar.

So what does change look like for Cubans we spoke to? They know they don’t want fast food outlets on every corner or multi-national chain stores throughout the main streets. They’re looking forward to greater opportunity to run their own businesses, a higher standard of living, more access to the internet and the outside world, and the opportunity to travel – things we take so much for granted.


I’m looking forward to re-visiting in 5 years to see Cuba then.

More than you ever wanted to know about ACC (and a bit about how to reduce your levy)

Clients, particularly new clients, often ask about “registering” with the Accident Compensation Corporation, ACC.

The short answer is that no registration is required. ACC will find you!

When you file an income tax after 31 March each year the salary and wages information (including shareholder salaries) from that return is sent from Inland Revenue to ACC. ACC then calculates the amount of levy based on the business’ Business Industry Classification (BIC) number and the amount of salary and wages paid. Each employee is only charged a levy up to $118,191 of salary and wages so if an individual earns $150,000 a year then they will only be charged a levy on their earnings to $118,191.

Your BIC number is determined by the industry you operate in rather than the type of work you do. So if you do general administration work then you may be able to use an administration code but if you do administration work for a forestry company then you will need to use the forestry BIC.

Industries with higher accident costs will have higher levy charges.

The levy is made up of several portions: current and residual portions of the work account levy, current and residual portions of the earner levy, and the health and safety in employment levy. The earner levy is charged through the PAYE system for employees but is part of the total employer levy for shareholder employees.

When you set up your business you will generally be asked for your BIC when you register for GST or obtain an IRD number. If you already have an IRD number but are below the $60,000 GST registration level then ACC will contact you for your BIC.

Because your first ACC levy is charged after the business tax return has been filed, it may be some time before you receive your first ACC invoice. For example, if your income tax return for the year ended 31 March 2014 is filed in October 2014 you may not receive your ACC levy invoice until the following February or March. At the same time ACC will send you a provisional invoice for the current year based on last year, usually resulting in a large bill for your first year.

Very roughly you would expect the levy to be around $1,000 for every $100,000 of salaries and wages paid.

A couple of things to remember about earnings cover under ACC:

  • it only covers accidents and not illness. You may therefore want to have some income protection insurance
  • you may not have reasonable loss of earnings cover if you are in your first year of operating your business. You may therefore want to consider Cover Plus Extra – see below for more details.

Earner levy deductibility

While the cost of the ACC levy is deductible for both GST and income tax purposes, the earner levy is not deductible for either. The earner levy constitutes the bulk of the levy.

For employees who are on PAYE it is deducted from the employee’s regular pay in addition to their PAYE so is considered a personal cost, not a business cost. Therefore for the self-employed and shareholder employees this portion of the levy is not deductible for the employer even though the employer may pay for it.

Reducing your levy

Given that the ACC levy is a significant cost for any business, we recommend that you review the BIC to ensure it is appropriate for your business and to consider Cover Plus Extra as an option to reduce both cover and premium costs.

There are also various ways to reduce your levies such as a discount if you have a low payroll (less than around $500,000) and can demonstrate good workplace safety in a high risk industry, reduced rates if you have a history of no claims etc although these can be easier to achieve if you operate in a trade rather than a desk role.

CoverPlus Extra

Around 12 years ago ACC introduced a new product called Cover Pus Extra for shareholder employees. While the levy is calculated to a maximum of $118,191 per shareholder employee, Cover Plus Extra allows you to choose a different level of cover with a corresponding effect on the levy premium.

So for example if you usually earn $100,000 in shareholder salary, you may decide that you only need cover for income of $60,000 or less if you have an accident and cannot work. You may be happy to have a lower level of ACC cover because you have income protection insurance or have income from other sources.

The lower level of cover reduces the premium but ACC’s computer systems cannot calculate the Cover Plus Extra premium when the cover is taken out each year. You will be charged the standard premium and after year end ACC will manually calculate the amount of premium refund you are due. With a large backlog recently ACC has been running up to 2 years behind in paying these refunds.

ACC is a complex cost for any business so for everything you ever wanted to know about ACC levies go to their website at

So what can your accountant do for you?

Your accountant will have had experience with literally hundreds of businesses – they’ve seen what works and what doesn’t work as well.  Why reinvent the wheel?

A qualification on that: we can’t say this for every accountant but by choosing a Chartered Accountant with a Certificate of Public Practice, or if they work for a NZ Institute of Chartered Accountants (NZICA) Approved Entity, then you can be reassured that the holder of the practicing certificate at least, is appropriately qualified with a degree in accounting, plus a post graduate qualification, has passed  NZICA’s entry requirements, and is subject to minimum continuing professional development requirements as well as regular practising review monitoring, backed up by a strict disciplinary process – all designed to provide you with some assurance around the quality of advice you are receiving.

A Chartered Accountant will work with you to increase your revenue and profitability, improve cashflow, legitimately minimise your taxes, and plan for the future of your business.

They do this through meetings with you to work out where you want the business to end up, where it fits in with your family and lifestyle, what you need help with (you may be very good at engineering but hopeless with sales or exporting), and then working with you to map out a plan for the future.  The numbers produced from last year’s accounts provide a basis for working out costs, who you’re selling to at the moment, the amount you may be able to borrow to fund growth etc.

Many business owners find that after they have paid for last year’s tax details they don’t want to spend any more on accounting fees.  Sometimes they go to business coaches, financial planners, property or share investment seminars to work out how to be better off financially. The answer is often under their nose, their accountant who knows their business almost as well as they do.

So how can a business owner get the most out of their accountant to improve their business and lifestyle – just ask them.


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