Ph: (03) 343 4448

 

   

             

 

              
                             Merry Christmas and a Happy New Year
             

It is time to reflect upon a year that has been challenging for most people and extremely demanding for others. Christmas is a time to be spent with family and friends, and it has been those networks that have got people through this year.  

We wish all our clients a Merry Christmas and a Happy New Year. Please be safe and look after yourselves.

Our office will be closed from Friday 23 December and will reopen on Monday 16 January 2012.
           


Promotion of Lance Edmonds
 
Lance Edmonds joined Kendons four years ago. Since that time many of our clients would have dealt with Lance. The skills that Lance brings to the table, along with his absolute dedication to client service, have been recognised both within the firm and by our clients. Lance has been promoted to the position of Associate, effective from 1 January 2012. We offer Lance our congratulations, his promotion has been fully deserved.
           
This promotion reflects the growth in our business and the fact that the Directors are committed to growing and developing Kendons. This year we have completed many new assignments, both for existing and new clients. If you have friends or contacts who are looking for an accountant, we would be pleased to assist.
                     
               
  

 


T
he Penny & Hooper Case

This case has been reported in the media. It involved two surgeons who each transferred their private practices from their own name to a company where the shares were held by a trust. They then paid themselves what was considered by the IRD to be a below market salary, with the balance of the company's profits being distributed to the trust as dividends. This reduced the amount of business income taxed in their own names (the highest personal tax rate at that time was 39%, even though it has subsequently been reduced to 33%), and increased the amount of income taxed at the trust tax rate of 33%.

A key consideration is that the physical exertion that generated the income was that of the surgeons alone. They did not employ other staff or other assets. The IRD also argued that the salaries they were being paid by their companies were below market rates and that the private businesses were being restructured solely for tax purposes in a way that was not a commercial arrangement, given standard business practice in that industry.

We have reviewed that use of trusts by our clients. We believe the structures in place with our clients are robust and meet the "guidelines" that have been "interpreted" from the Penny & Hooper case. The use of companies, including those whose shares are held by a trust, continues to be a legitimate form of business structure. Salaries however need to be justifiable on a commercial basis. Businesses that restructure are at greater risk than those businesses that adopted those structures from the beginning. If you have any concerns, please contact your Kendons business advisor.
           

           

                                   
Changes to gifting legislation

There have been changes made to the gifting legislation, effective from 1 October 2011. These legislative changes provide the opportunity in many instances for amounts owed to settlors of trusts to be gifted off in full without attracting gift duty.

We exercise caution in this area and strongly recommend that you contact your Kendons advisor before any substantial gifting is performed. Each case needs to be looked at on its merits and substantial one off gifts generally impact on the eligibility for rest home subsidies.


                             



           

 

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