ASB Income Calculations

  • You must have one of the following to accurately calculate base pay.

    • Payslip clearly stating annual base salary

    • Employer Letter/Contract confirming base salary or hourly rate and minimum hours per week.
      The employer letter cannot state average hours, it must be ‘minimum’. This can be up to 12-months old.

    • 3x payslips that show the exact same amount of income every pay cycle - annualise this figure. If it includes overtime or allowances, see instructions in next section.

    • Payslips regularly showing ‘ordinary hours’ or similar wording. For example, if the payslip shows ‘Ordinary hours - 40 x $26ph’ and then all other payments are on top of things like bonuses, overtime, meal allowances etc, then we can take 40 x 26 = $1,040 per week or $54,080PA as the base pay

  • Overtime, Allowance, & Commission

    You can incorporate all overtime and allowances into the “salary and wages” figure.

    Use latest 3 payslips and calculate average. IF the highest/lowest payslip is less than 15% from the average, proceed with the average figure. No scaling required.

    If one payslip is more than 15% different from average, you use 12-mo IRD income detail instead as income amount. No scaling required.


    For this you will need

    Bonus

    Give the last 2 years IRD summary and use the lower of the last 2 years as your bonus figure.

  • Requirements

    • Client has worked the role for 2 years

    When the client is not on a permanent contract, we must use the average of the last 2 years income, according to their IRD summary to determine their income.

    This doesnt have to be tax years, it can be 2 years from todays date.

    It is not scaled further and is used at 100% in the calculator.

  • You will need

    • Last 2 years financials

    • IR4 if in a company

    • IR3, IR7, or IR10 if in personal/trust names

    Before beginning, take note of the owners as per companies office/annual report. If the client is only one of two owners with equal holdings, then only take 50% of any numbers calculated below.

    Take out any shareholder salaries or directors fees and include those at 100% under ‘Salaries & Wages’, assuming they relate to your client.

    Include all business loans in servicing and provide 3 months statements for each.

    Net Income Calculations

    Take the net income.

    x0.72 - this will take off 28% of assumed tax.

    Example

    Net Income = $50,000

    $50,000 x 0.72 = $36,000

    Do this for the last 2 financial years and average the 2 figures OR use the most recent tax year, if that is lower than the average.

    Put this figure into the ‘Amount (Annual After Tax)’ box

    Addbacks

    Acceptable addbacks

    • Depreciation

    • Home Office

    • Interest

    Add these up for each year and average the 2 years. No need to take tax off as these are already net of tax. Add this to your ‘Amount (Annual After Tax)’ box.

    Example continued from above

    • Depreciation: $10,000

    • Home Office: $2,000

    • Interest: $1,000

    Total = $13,000

  • You will need

    • Clearly split projections. There cannot be a mix of actual and projected in the same figues.
      EG: It must say

      Apr - Jul Actuals
      Jul - Mar Projections

    Usually in 2 separate columns.

    • Previous years actual financials

    • IR4’s, IR3, IR7’s and IR10’s as appropriate (proof of income lodged with IRD)

    1. Calculate the full previous years financials as per the above category ‘Self Employed Business: No Projections’.

      Note these figures in your diary notes.

    2. Now we need to calculate the projected year’s final income. This has to be done in 2 parts. The actual part year, and the remaining projections.

    3. For the Actuals, take the income and addbacks as in ‘Self Employed Business: No projections and keep the final Annual NET figures to one side. This will likely be a small amount depending on how much of the financial year has passed.

    4. Scale the projected income at 50%

    5. Take the Net Profit Before Tax as in the projections. Take off 28% tax (x0.72).

      EG: NPBT = $40,000 x 0.72 = $28,800 Annual NET.

    6. Add in any addbacks, without taking off anything for tax as addbacks are already net of tax.

      EG: Home Office - $2,000

      $28,800 + $2,000 = $30,800.

    7. Average this figure out with your previous year’s financials for your final Annual Net Income figures.