Gilmore Taylor Associates Ltd Blog

Is your business ready for cyber litigation?

 

When household brands suffer data breaches, you're on notice that your business could be the next potential target for cybercriminals.

 

This has the potential to impact your brand, reputation and worse. There are also regulatory and legal obligations in most jurisdictions that require you to safeguard and secure consumer data. Fail to do this and you risk exposing yourself to legal liability and even litigation from your partners, clients and customers.

 

The sensible thing to do is to have a policy and plan of action for dealing with cyber security breaches, with a clear awareness of the legal implications.

 

If you are not sure how prepared your business is for litigation, start by asking these 3 questions:

 

1.       How secure is your operation?

 

Your cybersecurity program not only needs to be as hacker-proof as possible, it needs to be ready for litigation. The better your cybersecurity program protects your assets against reasonable and realistic threats, the better it will stand up in court when someone's questioning how seriously you took your duty of care. A court is unlikely to expect your cybersecurity program to be bullet-proof, but it must be highly defensible. You must be able to show that it was given careful thought and was reasonable in all circumstances.

 

2.       Are my staff up to speed?

 

Your staff can be the weakest link when it comes to cybersecurity, so make sure they understand their responsibilities. Consider the need to upskill, re-hire, or supplement IT staff if you don't have people with right skill set. You need someone with exemplary security credentials, an individual who can take the witness stand and speak about your security measures with real authority.

 

3.       Other questions to ask

 

You also need to be constantly asking yourself these questions - things you could be asked in court by a lawyer trying to prove you didn't do enough. So, make sure you have watertight answers before declaring your cybersecurity program is up to standard.

 

·         Are we sure what we're doing is best practice? How do we know? Can we show how we came to these conclusions?

·         What security measures do we use to protect our data?

·         Have we declared our objectives and plans in writing, so everyone is clear?

·         Does our cybersecurity program take into account business strategy-are we across any planned mergers?

·         Do we know the risks posed by our vendors and other partners?

·         Are we mitigating all the potential cybersecurity risks?

·         Do we have an emergency plan for a sudden attack? Why is it the best plan possible? Does everyone know what it is?

·         Has everyone been trained in the physical security of IT (e.g. laptop theft) and social engineering attacks?

·         How are we making sure this isn't all written out and just put in a drawer?

 

Fail to ask the right questions and you risk exposing yourself to a fine, litigation or worse. The key is to be prepared and have an effective cybersecurity policy in place before an event occurs.

 

 

Ring-fencing rental losses

 

Ring-fencing rental losses

 

The government introduced their long signalled changes to rental property tax into Parliament.  They propose introducing loss ring-fencing on residential rental properties.

 

What do these changes mean?

 

Speculators and investors will no longer be able to offset tax losses from their residential properties against their other income (for example, salary or wages, or business income), to reduce their income tax liability.

 

How will it work?

 

At its most basic, any losses will be carried over to the next income year.  No PAYE refund will be issued to the investor. The losses won't be able to be utilised until the investment makes a profit. The ring-fencing will apply on a portfolio basis, so if an investor has more than one property, losses on one can be offset against profits on another. For many investors, it will take some time to pay down a mortgage before the investment becomes profitable.  The ring-fenced losses won't be utilised until quite some time in the future.

 

What can losses be utilised for?

 

Under the suggested changes, ring-fenced residential rental or other losses from one year could be offset against:

 

·         residential rental income from future years (from any property); and

·         taxable income on the sale of any residential land. e.g. any capital gain caught under the Bright-line test rules.

 

Losses can't be used to offset income from other investments.

 

What property is excluded?

 

·         A taxpayer's main home if they are renting out part of it ( a significant number of family homes in New Zealand are owned by family trusts. The definition of "main home" would therefore ensure that a home owned by a trust can be regarded as a main home);

·         Mixed-use assets as there are already specific rules on these;

·         Any property that was bought from the outset with the intention of resale;

·         Certain accommodation provided for employees, and:

·         Property owned by 'widely-held' companies (e.g. 25+ shareholders).

 

When is it intended to take effect?

 

It is proposed that the loss ring-fencing rules will apply from the start of the 2019–20 income year, assuming the bill passes through all stages in Parliament unchanged.  The rules could either apply in full from the outset, or alternatively they could be phased in over two or three years.

 

 

 

Inland revenue are reminding people to use only its secure online service, "MyIR", to update customer bank details.

In anticipation of an estimated 750,000 automatic tax refunds there have already been two e-mail scams requesting taxpayer information.

 

More details can be found here:

https://media.ird.govt.nz/articles/always-use-ir-secure-channels-to-update-bank-details/

 

 

From next month businesses will be able to apply for a share of ACC's $22 million injury prevention fund.

 

Grants can be applied for to either enable workplaces to solve workplace health and safety issues, or to help small to medium business access training, professional health and safety advice, or safety related capital investments.

 

For more details see

https://www.acc.co.nz/about-us/news-media/latest-news/new-22-million-incentive-to-help-businesses-reduce-workplace-injury/

 

Parliament passes changes to Employment Relations Act

The Employment Relations Amendment Act 2018, passed in Parliament yesterday, changes employment law with the aim to improve fairness in the workplace and deliver decent work conditions and fair wages.

The Act restores protections for employees, especially vulnerable employees, and strengthens the role of collective bargaining in the workplace. Many of the changes are familiar to businesses, as they roll the law back to how it was as recently as 2015.

The key changes include:

  • reinstating prescribed meal and rest breaks
  • strengthening collective bargaining and union rights
  • restoring protections for vulnerable workers, such as those in the cleaning and catering industries, regardless of the size of their employer
  • limiting 90-day trials to business with fewer than 20 employees.

Most changes take effect at two stages: the day after Royal assent (expected Friday 7 December 2018), and on Monday 6 May 2019.

Changes under the Employment Relations Amendment Bill 2018


Inland Revenue walks the talk on payday filing

Inland Revenue has become the country's first big employer to adopt payday filing ahead of it being mandatory on 1 April next year.

Customer segment leader Richard Owen says switching early makes good business sense.

"There are 5,138 staff to pay every fortnight at Inland Revenue so waiting until April to adopt a new system didn't seem a sensible option."

"We have been telling all employers that it's better to switch sooner rather than later and there's no point in saying that unless you're prepared to practice what you preach."

More than two months of pay runs with payday filing have been successfully completed at Inland Revenue. This means all the PAYE and deduction information about its employees has been filed at each fortnightly payday instead of monthly.

Receiving this type of information on a timelier basis will allow Inland Revenue to be more accurate when calculating taxes and social entitlements such as Working for Families tax credits.

It's also a key part of the proposed plan to simplify end-of-year taxes for individuals.

"One of the benefits of Inland Revenue switching early," says Mr Owen, "is that it has taught us some valuable lessons we can share with other significant employers.

"We're intimately aware of the planning involved in the switch, especially when there's a large number of staff to pay. We've drawn on our experience to create easy-to-use guides to help employers using the same payroll software through each step of the process."

Inland Revenue Chief People Officer Mark Daldorf says the developer of the payroll software package the organisation uses has been helpful with resolving obstacles.

"Pay runs so far have gone well and we've seen only a few minor, but resolvable issues, for a few staff with unique circumstances.

"Like any new process, it takes some getting used to, especially how the employment information is displayed in myIR but we've been able to quickly adapt to the new look and feel."

Mr Owen says Inland Revenue is willing to help employers adopt payday filing in any way it can.

"We've shown that it's possible to shift to payday filing well ahead of the deadline so other large employers should feel confident they can do the same.

"The first step is to start talking with your payroll software provider and work out a plan to get you ready well in advance."


Inland Revenue launches public campaign

 

Inland Revenue launches public campaign to explain the

biggest tax changes in a generation

 

Today Inland Revenue kicks off a major public information campaign to tell New Zealanders what the biggest changes to the tax system in a generation will mean for them.

Almost every household and business will be affected and the campaign, including print, radio and online advertising, a website, and direct communications to wage and salary earners, will continue well into next year.

Inland Revenue Commissioner Naomi Ferguson says that, subject to Parliament passing all the necessary legislation, the April 2019 tax year will see a fundamental shift in the way New Zealanders interact with the revenue system.

"For the first time, automated tax assessments will see around 1.67 million New Zealanders get a tax refund paid straight into their bank account," she said.

"About 720,000 of those people will not have had any recent contact with IR, some not for 20-years or more, so it may come as a surprise. That's why we're running this campaign – to make sure as many people as possible understand what's happening.

"And of that 720,000 about 530,000 will be beneficiaries and people who earn less than the minimum wage and have never applied for a tax refund before.

Ms Ferguson said more than 330,000 Working for Families customers would benefit from the new process with IR getting their wage and salary information immediately, allowing IR to adjust payments so customers are always getting the right amount.

"So much of this automation is made possible by the new payday filing process where IR will get your payroll information on your paydays instead of employers having to do a separate report to us once a month. Payday filing is mandatory from 1 April and many have started already. 

"And for investments, the new system will see dividend and interest payments reported to IR more frequently by the banks and others who make the payments, so that taxpayers receiving them don't have to," said Ms  Ferguson.

Ms Ferguson said that despite a lot of change being introduced, most people would pay and receive the right amounts during the year without having to do anything. "That's the point of all these changes," she said, "to make tax easier and more accurate for New Zealanders.

"Come the April 2019 tax year our transformation process will see the 'big ticket' items -  GST, provisional tax, income tax, Working for Families and investment, all on the new system.

"The next steps, in the coming two to three, years will see child support, student loans and Kiwisaver bought in as well. We've made a lot of progress and will continue to do so."

 

Electronic payments the way of the future

The days of being able to pay your tax bill with a post-dated cheque are coming to an end as Inland Revenue moves with its customers, away from cheques towards electronic payments.

Inland Revenue spokesperson Meade Perrin says the plan is to stop accepting post-dated cheques in February next year.

"Payments New Zealand figures show 67 out of every 68 payments in New Zealand are electronic and there's a 20% decline year on year in the use of cheques generally.  So we're encouraging our customers to go with the trend and move to the simpler, easier and more certain electronic payment methods," Mr Perrin says.

"Customers send Inland Revenue around half a million cheques each year.  That's 4.5% of the total payments we receive. Around 17% - or more than 85,000 cheques - are post-dated.

"Instead of post-dating a cheque, and mailing it in, customers can use internet banking to set the date a payment comes out their bank account. That has the same effect as a post-dated cheque – the payment's made on time, when the customers want it to be made and won't be forgotten.

"There will be some impact on customers who're used to post-dating cheques but we're confident that can be worked through given most banks have a simple and convenient system for electronic payments.

"Compared with electronic payments, cheques are expensive to process and the technology used to process them, both by IR and banks, is approaching the end of its working life.

"Technology is more and more becoming part of our everyday lives and there's already been a significant shift to using digital methods for paying tax and receiving refunds, with 95.5% of all payments received by IR already digital. 

"We want to keep that momentum building and ease taxpayers towards digitising all their payments," Meade Perrin says.

Options for payment:

• Electronic via internet banking or direct debit in MyIR. Paying this way minimises delays and includes a formal notification of the date and time the payment was made to Inland Revenue. 

• Customers can make payment by debit/credit card over the phone, through the unauthenticated payment page the Inland Revenue website, and through myIR. 

• Taxpayers can also set up direct debits in myIR.

Cash or eftpos are still payment options but only at Westpac branches. They're not accepted at Inland Revenue offices.

New GST rules to level playing field

 

New GST rules to level playing field

Overseas companies selling goods online into New Zealand will soon be required to collect GST in the same way as domestic retailers.

Speaking at the Chartered Accountants Australia New Zealand tax conference today, Stuart Nash said that new rules would be aimed at imported goods valued at or below $1,000. Customs would retain responsibility for collecting GST on imported parcels valued more than $1,000.

"There are about 26,000 small businesses in New Zealand employing more than 62,000 people in the retail sector. Many are in competition with foreign firms who sell exactly the same product into our market without collecting GST," says Mr Nash.

"We intend to make offshore suppliers collect GST on low value goods at the moment of sale, and in turn, buyers of these goods will no longer pay Customs tariffs or border security and biosecurity fees. This will simplify compliance and administration costs at the border.

"GST has been collected on services and digital products from offshore, such as streamed movies and music, since 2016. This extends that to goods.

"With the steady growth in online shopping from offshore suppliers, a significant amount of tax revenue is being lost. Mostly though, it's a matter of fairness so the sooner we get this in place the better. This measure aims to help level the playing field and improve the integrity of our tax system.

"Our new rules have been endorsed by the Tax Working Group and will be broadly similar to those introduced by Australia in July. The EU has also committed to following this approach," says Mr Nash.

 

ACC to make refunds as new system reveals business levy overpayments

Released 11/10/18

 

ACC will refund over 300,000 business customers after uncovering two historical overpayment issues, says Head of Business Customer Service Delivery, Phil Riley.

These issues are:

  • We'll refund all first-year levies collected since 2002 from self-employed customers, who worked fulltime (ie averaged over 30 hours per week across the financial year). This affects approximately 106,000 customers and equates to approximately $36 million in levies.
  • We'll also refund about $64 million to around 200,000 businesses who paid provisional invoices over the same period, in situations where they were not required to do so.

We'll also be paying interest but it's too early to say how much it will be in total.

The overpayments date from 2002, and total around $100 million or 0.37% of the levies collected from the Earners and Work accounts over that period. They were uncovered during preparations for a new levy system.

Refunds to begin in October 2018

"We'll begin refunding customers this month," says Phil Riley.

"The average refund works out at about approximately $340 (excl GST) for first-year self-employed, and $415 (excl GST) for provisional payments. 

"We very much regret the overpayments and apologise to anyone who made a payment that was not required. Our focus is now on making this right as soon as we can, and we have already begun contacting affected customers.

Check if you're due a levy refund.

New system reveals overpayments

"ACC has been true to the intent of the regulations that newly self-employed people, such as all business owners, should pay a levy. However, we discovered last year that since 2002 the regulations have been drafted in a way that doesn't provide for the levying of first-year self-employed to occur.

"We became aware of the drafting issues while preparing to replace our old levy system, which included a legal check that the new system would be compliant with regulations. When we found the problem, we immediately stopped invoicing all newly self-employed people. 

"We've taken the opportunity to consider how we invoice all self-employed people. We're currently seeking feedback during levy consultation on a proposal that will switch to an arrears approach similar to how self-employed customers pay income tax."

Phil Riley says preparations to migrate data to ACC's new levy system uncovered the second issue of provisional invoices being paid by businesses that had subsequently ceased trading or changed their business structure but not informed ACC.

"Since these two issues were uncovered, we've been working on a number of actions to clear the way for refunds. This includes:

  • verifying the extent of the problem
  • working with MBIE to assess if wider actions such as legislative change were required
  • introducing our new levy system, which provides a permanent fix and allows automated reimbursements.

How long we expect it may take

"We expect it may take until April 2019 year to complete the refund process. We'll work with Inland Revenue, the Companies Office, and searching public records to trace people if we hold no current contact details. In the meantime, we strongly encourage customers to update their contact details through our form.

Phil Riley says the total refund has been factored into the levies that ACC is currently consulting on. ACC's funding policy requires it to spread impacts over 10 years, so the refund accounts for a one cent increase in the Work Account (where a levy reduction is proposed), and well under one cent for Earners (where a 2.5% increase is proposed).