How to save money with IT – Part one

Smart companies view ICT (Information Communication Technology) as a business enabler, rather than a cost. Industry analyst IDC recently reported, in a survey, a direct relationship between ICT investment and success, reaffirming this important distinction. Certainly, even at our local level, we notice the difference.

But these are tough times, so it’s become more important than ever to understand the connection between the investment and the return. In this five part series on how to save money with ICT, we’ll be covering a range of topics, introducing you and your customers to tried, tested and proven opportunities to sharpen up bottom lines.

Opportunity One – Halve your Telco Bill

Most companies are still paying around 4 cents for a local call, 10 cents per minute for a national call, 12 cents per minute for a call to Australia and 28 cents for a call to their mobile. There are now very well established, credible companies offering the same or often better levels of service - for significantly less money!

Equally exciting is the new era of phone access called ‘SIP trunking’. When I say new, I mean new to New Zealand; over 75% of connections in most first world countries already use this technology, but we’ve been a little slow on the uptake. In a nutshell, SIP trunking allows your call to be transferred over your data connection, rather than over a separate set of phone lines. In doing so, costs reduce considerably, while functionality actually increases.

Having facilitated numerous customer moves away from traditional access and toll connections, the average monthly spend on their telco bill has halved. If your spend is typical (an average spend is about $5,000 per month in the mid-market), then chances are that removing, say, $2,500 from your current expense line could represent welcome relief to revenue pressure or, more likely, present a  great opportunity to invest in technology which will make a much greater difference to long term saving and productivity objectives.

Tune in next issue for our pick of the best investments in IT you could make with your saving.

Chris Maclean is CEO of Maclean Computing, New Zealand’s premier provider of ICT to companies with between 25 and 250 computer users. You can contact Chris on chrism@maclean.co.nz for further information.

Current focus of IRD’s Investigation Unit

An area the Investigation Unit is currently focusing on is restrictions around use-of-money interest (UOMI). Generally, a taxpayer will receive UOMI on overpaid provisional tax.  However, a little known provision in the Tax Administration Act restricts the amount of overpaid tax that the UOMI is calculated on to the balance in the taxpayer’s imputation credit account (ICA).  For example, if a taxpayer has a refund of $10,000 but only has imputation credits of $5,000, not only will the taxpayer only receive a refund of $5,000 (being the balance of the ICA) but UOMI will only be calculated on the $5,000, not the $10,000 refund.

The Investigation Unit continues to issue questionnaires to taxpayers.  The typical questionnaires are:

·         Transfer Pricing (focus on cross-border related party transactions)

·         Financing (focus on hybrid instruments, thin capitalisation)

·         Company Audit (focus on internal workpapers and board minutes, indirect taxes, computer audit)

·         Employee Remuneration (focus on share schemes, allowances, benefits).

Investigations tend to be by one of three methods:  desktop review, risk review and an audit.  A desktop review is a high level review of information filed with the tax return.  The review may result in an “information request” and progress to an audit.  For a risk review, the taxpayer completes a detailed questionnaire which the IRD then ranks according to specific risk factors.  Depending on the rating allocated, an audit may result.  An audit is the full review of a taxpayer’s tax affairs.

Another area the IRD’s Investigation Unit is currently focusing on is the impact of companies adopting International Financial Reporting Standards (IFRS) and the IRD is closely monitoring the accounts and tax returns of entities that have recently implemented IFRS. In particular, the IRD is reviewing the IFRS adjustments and monitoring the effect of these adjustments on tax payments.  Common adjustments the IRD is monitoring include reclassification (e.g. software assets reclassified as intangible assets) and the treatment of financial arrangements (e.g. adjustments spreading the income and expenditure over the life of a financial arrangement).

If you do receive a questionnaire or information request from the IRD, it is best to advise your Hayes Knight adviser as soon as possible. Any voluntary disclosures made before formal notification of an audit can reduce any shortfall penalties imposed and you can also exercise your right of non-disclosure of any tax advice documents.