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Some need to know, with a bit of WealthDesign nice to know thrown in.

Just like New Zealand dairy farmers, European dairy farmers are also feeling the heat.  I received an update on the state of farming in the EU recently.  The world wide dairy down turn is hurting everyone.  Swedish and Danish farmers are also losing money and if prices stay low, estimates are that 25% of European dairy farmers will stop production. 

In New Zealand however, we run a low cost, grass feed system and can survive where our international competitors struggle.  It won’t take much of a swing to change the dairy landscape, especially when you consider the volumes produced outside of New Zealand.

John Barber

 

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As an export nation, we need to get our product to market. Much has been said about the strong demand for beef in the USA, but currently, there’s a BIG problem. The port workers in the West Coast of the USA are in a dispute with their employers. The problem our exporters face is beyond their control but as a result of this issue, goods passing over the docks have slowed dramatically and a long backlog has developed. Containers are sitting on ships and distribution trucks sit idle.

This is a major problem. It has the potential to damage not just exports from New Zealand but also the US economy, and the economy worldwide. The domino effect has already kicked in – for example, Honda has slowed production, directly because of this port dispute.

Interestingly our media hasn’t yet picked up on this and economists are still talking up the beef exports to the USA. If you are interested, I suggest you google and check it out.

We live in a global village and what happens on the other side of the world can have an impact in our backyard. 

 

John Barber

 

 

 

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Beware the ‘ditch ACC’ sales pitch

In New Zealand we are fortunate to have a world class accident compensation scheme. We all hear the sad stories of ACC not meeting people’s expectations, but it is still a great scheme in my opinion, and has many benefits.

At present we are seeing a lot of insurance advisers giving blanket advice to reduce ACC and take out private insurance. In some cases this is prudent, especially if your income would continue in the event of a period off work i.e. dairy farmers. But it’s not for everyone and this is where I get concerned.

ACC pays out after seven days versus private insurance that pays only after 30 days off work (at best). ACC covers you even if you have risky hobbies such as motor sport or mountaineering.  Most private insurers would exclude these types of hobbies. ACC also has an accidental death benefit built in as well.

The other thing we see is clients with back and knee exclusions on private cover, and advisers suggesting reducing ACC, just based on a short term premium savings on ACC. This doesn’t always bring about the best outcome.

ACC is a complex product and needs specialist advice.  Before you change ACC because of a sales pitch, ask for a written report, as for the proof that the person actually knows ACC in depth.   Make sure you are talking to someone who really knows the complexities of ACC and not just someone using ACC as a way to make a sale.

If you want quality ACC advice, or you want to double check what you have had recommended, give us a call and we can refer you to a firm that does nothing but handle ACC. 

John Barber

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The IRD have come out with a warning about insurance payments in the event of a claim.  If you receive any insurance payments, tax could be payable on it.

If you’re a business or rental property owner, you may need to declare some insurance payments in your income tax and GST returns. These could affect the amount of tax you should legally pay.  For example, the following insurance payments are taxable:

•loss of profits

•loss of rent

•reimbursement of business expenses

•destroyed or depreciated assets.

Some common mistakes include not declaring insurance payments as income, not accounting for GST or not returning depreciation recovered when the payment is for a depreciable asset. Another area that one should consider is the payment of loss of revenue cover.

To avoid errors, you should keep all records relating to insurance payments for your business or rental property or ask your accountant or tax agent for help with this issue.

The Christchurch disaster has made the IRD aware of this and they now have insurance payments in their sights as a source of tax avoidance.

Any questions you have regarding your unique situation, please give us a call.  We make the complicated simple!

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Recently Graeme Wheeler, the Governor of the New Zealand Reserve Bank (NZRB) increased the official cash rate again, to 3.5%.  For months he has been talking up this process and as a result the New Zealand dollar has appreciated from $.79 US to $.87. This is great if you are off overseas on holiday, but if you are in the productive sector, have a business overdraft, or if you have a mortgage, you could be forgiven for being a little peeved.

In my opinion, the system doesn’t work as it should.  Auckland house prices continue to push ahead because of demand and the Christchurch rebuild is pumping money into their economy. The New Zealand dollar is now one of the most traded currencies in the world and our main exporters are hurting big time.  We are also the target for the carry trade (investing in New Zealand for higher returns) and the NZRB seems to use information that is either outdated, or completely corrupted by data out of Auckland and Christchurch.  How we ever get the message to these guys in the ivory towers that the provinces aren’t suffering from inflation, is beyond me. Inflation infers that wages are increasing or people expect asset prices to rise in the future.  With profit warnings from all the major retailers, it is clear that people aren’t spending. This, along with dairy farmers putting their chequebooks away due to the bleak dairy forecast, makes me wonder if the NZRB is completely out of touch with the real world.

For what it’s worth, I think Graeme Wheeler should either get in his car and come and talk to people in the provinces, or find a real job!

John Barber

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