WealthDesign

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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In the budget this year the government announced funding for health would be a record $15 billion.  And we expect it will continue to see new records in the years to come.  Under 13s will now get free GP visits and prescriptions too, and more money is being allocated to things like bariatric surgery, elective surgery and colonoscopies. 

Sounds good huh?  Tell that to the people who are still waiting to get onto a waiting list.

A study by TNS Research showed around 280,000 New Zealanders were in need of elective surgery, with public waiting times commonly in excess of 12 months.  The government’s statisticians will tell you there are 110,000 people on waiting lists.  This means another 170,000 are not even on the list!   So while the kids may be able to get to a GP even after tea time, mum or dad might not find it so easy to get surgery. 

Health insurance, ACC, and personal payments provide more than half the elective surgery in this country, and the trend over successive years has been for more and more surgery to be funded outside the public health budget, no matter how big it gets.

Further reading here at the Health Funds Association annual report, published this week.

http://www.healthfunds.org.nz/pdf/2014%20annual%20review.pdf

Regan Thomas

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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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Women have always fought for a better deal for their children, for their families and for women in general. In fact, New Zealand women have lead the world in making progress for women’s rights, starting as far back as Kate Sheppard’s charge for women to vote in a national election.

The What Really Matters Report from Aegon UK has found that despite 71% of mothers saying the financial security of their children is among the top priorities in their life, 57% of mothers have no protection cover at all, and 49% have never discussed what would happen in the event of their death.

The report also says that 72% of mothers go out to work to support their families, but are underestimating their financial importance to the family unit. Even Forbes Magazine reports that a stay-at-home mum is worth $113,000 a year.

While the Aegon research is from the UK the average New Zealand experience is likely very similar. As an adviser, I frequently encounter families that have under-estimated the potential financial loss from the death of the mother. Recently we have seen news stories about dependent children publicly appealing for help to pay the mortgage after their mother died.

Nobody wants that to be their legacy, and a reliable adviser is pivotal in helping translate your priorities into the most appropriate actions to protect your family’s future. For around the price of a cup of coffee per week a 40 year old woman can buy $250,000 or more of life insurance. Talk to us.

Regan Thomas

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We are often asked to insure people’s assets. They always insure their homes but often forget about their largest asset – the ability to work.

Every working New Zealander is covered by ACC up to 80% of their take home pay. But are you aware of the ACC cap of $91,014 per year? High income earners are capped, so if you are earning over $109,000, you are not going to get 80% of your salary in the event of an accident.  This highlights the need to consider private income protection cover, to make up the shortfall.  Your costs will still remain the same, so having your costs covered during any health challenge will bring peace of mind.

Are you aware that different insurance policies have different policy wording relating to ACC payouts? In some cases, all of the ACC payment comes off anything that the insurance company will pay.  But this isn’t the case for all companies.  This is where having the right insurance, with the right insurance company becomes vital.

If you have income protection, you need to talk to us about checking the wording. If you don’t have income protection insurance, then you really need to talk to us!

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