The Brave New World – What changes are likely from our Labour / New Zealand First Government

The past three months has taken New Zealand on a political roller coaster with the result being a new minority government with a new policy and social agenda for the next three years.  In our view, it was always a strong possibility that New Zealand First would go with Labour, and the exclusion of the Greens from the government is political suicide as they sit once again outside of the government and will have little to show for the same level of support that New Zealand First gives to Labour.

Labour identified a number of priorities it would be addressing in its first 100 days and is set to wind back much of the deregulation National introduced. Change is coming and what is going to be interesting is what does this change mean for you as typically a business owner in the context of the post-election New Zealand.

  • The promised tax cuts will not occur.
  • We would expect the top marginal individual rate and the top trust rate to increase to at least 36% and be aligned.
  • The Brightline test for residential property will extend from 2 to 5 years. What will be interesting is which properties this applies to, ie existing own properties or those bought after the law change is made.
  • A tax working group will be put together and involved in public consultation. Its report back will affect taxes from 2021 on.  It will focus on no increases in taxes, and no inheritance tax or other taxes on the family home.  That still does leave the door open for inheritance tax or other taxes on other assets and investments.  We think capital gains is unlikely as a tax, but time will tell.
  • A 12.5% tax back incentive for research and development.
  • Continued focus on multi-nationals. Nothing changes from the old government here and the BEPs programme will continue.
  • A key one will be the removing of the ability to use negative gearing losses. The question is exactly who this will apply to, ie company groups or just individuals claiming the losses in their tax returns?
  • An Auckland regional fuel tax for the Auckland Council and is expected to be implemented within 6 months.
  • Foreign ownership of land is to be subject to greater restrictions and greater involvement of the OIO. The concern here is the OIO is already significantly overloaded and has to date been largely a rubber-stamping exercise anyway.
  • A rent to own scheme for low-income workers to assist them to buy their first home.
  • Expect labour law reforms. Now is a good time to get rid of underperforming staff while you are still able to.
    • The 90-day trial periods, introduced by National in March 09, will be replaced with new trial periods and will require reasons for dismissal and justification.
    • Reinstatement will be the primary remedy for employment grievances.
  • The increase in the minimum wage to $16.50 from 1 April 18 and expectations for it to be moved to over $20 within the next 3 years.
  • Changes to paid parental leave increasing to 26 weeks per year, taking effect from 1 July 18.
  • Immigration restrictions targeting students and low skilled workers.
  • Superannuation to remain at age 65. With the Government resuming contributions to the New Zealand Superannuation Fund to help safeguard Universal Superannuation at 65.
  • Buy Kiwi made preference by the government.
  • Focus on regional development and rail networks, both within Auckland and in the wider sense.
  • A review of the reserve bank with an aim to lowing the New Zealand dollar.
  • Expect inflation to increase with particularly the increase in costs as a result of some of these and the added burden of the increase in the minimum wage. It can only push inflation up.


On the whole however, there is much for business and our clients to be happy with and excited by in terms of what Labour and New Zealand First have promising.  It creates opportunities in itself and you need to quickly focus on these to understand where they will be.

If we couple this with the trust law reform, which will still come into effect next year, even under a Labour government, it is going to be a busy year or two as we all get used to significant change in our existing environment.

As always, the Covisory team is happy to talk to you about your needs, now and going forward.  If there is anything we can do to help, please call us.

Please note that the information in this article is for informative purposes only and should not be relied on as legal advice. 

Reflection: A Tool You Need

With another 31st December rolling on by Covisory turned 10 years old. Over the holidays my youngest 20+ child quizzed me on whether I had any resolutions for 2017. This led to some interesting conversations on the concept of reflection.

I’m not one of those people who each year makes resolutions. I freely admit that the cynic in me watches to see how long the resolutions of others will last in the coming year. We all know the routine firstly you fall for the line that it’s a new year so you need to make resolutions. You start with good intentions but as life encroaches, those resolutions either drift off into the too hard basket or are just forgotten.

These easy to make, on the spur of the moment, influenced by what is the latest trends are doomed to fail. Why? New Year Resolutions have on the most part no meaning. People expect to fail with them, there are no consequences on them if the result is not achieved.

Making resolutions is not the problem it is the built-in expectation to fail. If we live our business and personal lives without reflecting on our past experiences, we are bound to make the same mistakes. We cannot break through barriers by doing more of the same. Not only must we invest in action we also should work on deep and sustained reflection on an ongoing basis and not just once a year. Reflecting will not solve all the problems but it will help move you a tiny bit closer.

Let’s face it life is busy these days. We are all guilty of spending a lot of our time chasing the immediate reward, the near-term “goal” — in short, the expedient and the convenient. We are all obsessed with doing. What we are not so good at is stopping and taking a hard look at Why and What we are doing. Reflection may be a tool talked about in education but there is little application when we move into the workforce. Why not – are we afraid of what we will find?

If a business is not doing well it is easier to cast blame for problems on difficult customers or an investor. Alternatively, maybe we look to blame the government bodies regulating the industry, or competitors and who hasn’t blamed the computer or an application for our failures? We do not automatically ask in a situation what am I doing wrong or right? How could I improve? Our culture allows us to avoid personal responsibility – we are guilty of not owning problems or to finding ways to solve them.

If we do not take time out of our week, month or year to make room for the deep questions and thinking we fail to grow. We opt for the distracting items that fill our time. It is not about working harder. We need to work smarter and this means having the time for reflection so that we can make changes and improve on past performance.

Breakthroughs to a product, a company, a market or industry do not come from being busy and jumping between multiple tasks. Change comes from an opportunity to have structured periods of reflection. We need time to ponder, to question, to model, and to research. Reflection drives experimentation and sparks innovation. By reviewing the processes and results we add to our understanding, gain insight and allow companies to respond to change. By taking the opportunity to reflect we can make our businesses radically better.

In today’s culture, we as individuals and businesses are engineered to Do, we have not been encouraged to reflect. To add reflection to our lives allows us to embed concepts and theories into our practices. It fosters constant thought and innovation that provides the means to allow us to grow as both individuals and professionals.

Within Covisory ‘Reflection’ is a core component of how we operate both internally and when we work with customers. If you need assistance, we are always happy to support you with this process. Please Contact Us. With a new year before us let 2017 be the year to not only learn from our experiences but regularly reflect on those experiences.

I will leave you with the words of Margaret J. Wheatley an American writer and management consultant:

“Without reflection, we go blindly on our way, creating more unintended consequences, and failing to achieve anything useful.”

Insight | Cash for Dividends or Growth?

In the last year we have received several question from families debating whether they should have a policy around the amount of dividends that are paid.
There is often a conflict between family members working in the business who can see the growth opportunities for it, and therefore want to see cash retained, and on the opposing side, family members who are typically not working in the business, want more dividends because they then can use that cash to support their lifestyle or personal investments outside of the family dynasty.
Sadly, there are no right answers to these questions but it is good for the family to have a discussion and more importantly for there to be an agreed minimum level of dividends set as a percentage of profits.

Insight | Are Family Meetings are worthwhile cause?

From our experience family meetings can serve many purposes. Above all, they start and can continue communication within the family. Whether these are difficult topics or topics that are more routine.
Family meetings are also a good way to educate younger generations around issues like trusts, wills and estates and succession within a business.
In our experience it is never too soon to start holding family meetings and to improve communication.

Family Business ~ Insight | We would like to introduce you to The Board

At Covisory Partners we are frequently called upon to provide business advice to clients which is sometimes outside the scope of what we feel comfortable doing.  As a consequence of this over the years we have built up a team of outside advisors and specialists that we often call on in these situations.

Recently this resulted in a more formalisation of this arrangement with the incorporation of a company called The Board Limited.  Take a look at to read all about our new initiative.

The Board Limited comprises of four high powered individuals (myself included) who have significant business experience.  We each bring a different skill set to the table and the aim is for whatever issues that keep a business owner awake at night, the Board can provide a person or team of people that they can talk to and help them to work through the issues.

The types of areas that The Board is able to handle and advise on includes the following:

  1. Succession planning for a business – whether you should keep, sell or do something else with your business.
  2. How to effectively grow the leadership capability within your business.
  3. What growth opportunities should you pursue in your business.
  4. How to finance growth activities within your business.
  5. Organisational review.
  6. Strategic planning.
  7. Recruitment of boards and CEOs for companies where owners wish to step out but maintain ownership and governance.
  8. Governance reviews.


So if you cannot sleep at night and you are troubled by what to do with your business or issues affecting it, The Board is the solution for you.  Take a look at the website and get in touch.

Family Business ~ Insight | Succession: The Good and the Bad

Over the past fortnight we have worked on two succession planning issues for families where a business is to be transferred to one child out of four in each case.

In the first situation the family is doing this as an open discussion and making sure that the child actually wants to acquire the business and understands the financial ramifications.  It is important that it is the child’s wish to acquire the business and not that of their parents which is forced upon them or imputed to them.

In that case, the child’s principle concern is financial, ie what happens if they cannot maintain the business as a result so as to enable the repayment of the debt to the parent?  This can be handled so that perhaps the debt is limited recourse, but the negative is that then removes a valuable asset for the other children.

Typically, the family business represents a very high percentage of the wealth of Mum and Dad when we come to look at succession issues.  If they want to transfer it to some but not all of their children, then it is important that equality between the children is considered.

In the second case it involved a farm as opposed to a family business but the logic is the same.  In this case the child that worked the land had got into the ear of Mum and Dad’s independent trustee who also happened to be his chartered accountant.  The parents, owners of the land and farm operation, were convinced to sell it to the child at a very concessional price with extremely concessional repayment provisions including that no repayment of the principal was to be made for 10 years.  While there was interest to be charged, again it was concessional.

A large part of the value of the farm was being transferred to a child without equal consideration for the other children.

At the last minute, Mum and Dad did realise there could be an issue and arranged a family conference where the whole exercise was sprung upon the other 3 unsuspecting children who to say the least were somewhat gob smacked.

When you are dealing with children and potentially transferring an asset to one of them and not the others, the key concern is to ensure that there is a perception of equality and fairness.  Even if there is to be some benefit for the child, in recognition of past service, endeavour or the like, it is very important that this is discussed openly and in a proper forum within the family or it has the potential to divide the family and poison relationships for the future.

Succession will continue to be one of the principal issues for families owning businesses over the next 10 years.  With many baby boomers reaching retirement age, what they do with their business is increasingly weighing upon their minds and keeping them awake at night.  Do they sell the business to third parties?  Do they transfer it to children?  What should they do with it?

There is never a right answer to this but what is important is work through a process so the family can see the options and understand the implications of each.  As always, we are here to assist.

Family Business ~ Insight | The Roles of Family Business in our Economy

At Covisory we are focused upon and dedicated to family business.  We do some work for corporates but our primary focus is on family businesses and their owners.

In our experience family businesses are more innovative and often able to out perform larger more financially resourced businesses.  This is because they are nimble on their feet and able to adapt and innovate quickly.

However, family businesses still have their own challenges.  There is always a need to balance the family and business issues and we see that in the parallel planning process that we so often go through with our clients.  If a family business makes $100 of profit after tax, there are going to be a number of competing demands on that profit.  These can range from paying the owners a dividend, to reducing debt within the business or privately, to funding capital equipment purchases, working capital or research and development.

The parallel planning process is about looking at where a family is going with the business and where the business is going itself and making sure that the two are in alignment.  Often it involves a recognition from the family that they simply cannot strip all of the profits out of the business, or from the business that the owners are entitled to a fair return on the money they have invested, particularly if they are not financially independent from the business.  This is an important challenge for owners to make sure that all their wealth does not remain tied up in a single risky asset being their business.  We have all seen too many businesses fail when Mum and Dad are getting close to retirement so it is very important to ensure that Mum and Dad put other savings away along the course of the businesses life to fund their retirement.

Maintaining the family control of the business is also important.  However, in our experience there has been a greater recognition that especially for higher value businesses often the best answer for a family is to sell it at the appropriate time and deal with the family by looking at how that money is distributed not only between Mum and Dad, but the children as well.  This could include both participating and non-participating children within the business.

Grooming a business for sale is not a 5 minute job.  We remain frequently surprised at how often owners of businesses think they can simply put their business on the market, and it will be sold and they will be retired in 3 months.  While this might be achievable, in our experience too often they will leave too much money on the table and ignore a number of viable alternatives.

The sale of a business is a process, it takes at least 2 – 3 years if you want to maximise your value out of it.  We normally like to look at all your key contracts and ensure that they are well documented and in place.  A good information memorandum is a must but it is also important to make sure that the business becomes more independent of Mum and Dad, the private costs are removed, that financially the results are optimised and that even a financial audit is obtained on an annual basis from a reputable accounting firm.  Whether that needs to be a big 4 or an international firm depends on the size of the business and who the likely buyers are.

In some cases we will work with owners of businesses to sell down a part of their business and take some money off the table.  This might lead to a further sale or listing in the future, or in some cases it may simply be the sale of a part of the business to a long term co-investor.  Either way, it is a good way of Mum and Dad getting some money off the table that is safe and can provide for their retirement.

For many businesses, Mum and Dad live the dream that children will come into the business.  While this is a worthwhile dream and should not be dismissed, it can cause tensions within the family particularly if that business ends up going to the child that came in, yet other children were not given the opportunity or appropriate financial compensation.  The passing of a business to a child or children can actually blow families apart if it is not handled properly.

More than likely, there are also issues from a hand over view point as often Mum and Dad simply don’t want to pass the business on to the children and the handover is haphazard and problematic.  Careful succession planning is needed to pass a business down through the generations.

So why are we stating all of this when it is probably the obvious, simply because in our experience it is obvious but sadly most family businesses don’t actually stand back from the business and look at whether they are running it to take cash out of it, or to build up its capital value and sell it ultimately.  The business may be the goose that lays the golden egg, but in reality you have to look after the goose and not make it lay too many eggs or it may suffer ill health.  Also, if you want to sell the goose in the future, you need to make sure it is in good health and producing as many eggs as possible.

At Covisory Partners we frequently work with business owners to help them maximise their exit value on the business, but more importantly to go back a step before that and look at what the real options for their businesses are.  To often families will not know what to do with a business and will end up selling it only because they met a business broker or private equity firm that tells them that’s the best thing.  Those firms are not necessarily interested in maximising the value out to Mum and Dad.  Whereas at Covisory we will look at all the options for you.  In our experience, too much money is left on the table by families exiting their businesses.  Will you make the same mistake?