Personal Risk

  • Health and Wellbeing
    • Become ill (short term or more serious)
    • Suffer critical trauma
    • Death
    • Require treatment in hospital
    • Burnout
  • Relationship break up
  • Financial or cashflow difficulties and bankruptcy

Business Risk

  • Asset
    • Car is damaged or stolen
    • Clinic is fire damaged
    • Equipment is lost/damaged/stolen
    • Laptop develops a virus
    • Drop mobile phone
  • Liability
    • Privacy or security breach
    • Important data is lost or corrupted
    • Someone is injured because of my actions, inactions or advice
    • I cause damage to somebody else’s property

Most business risks/asset protection can be covered or mitigated by

  1. Good business practice and a balanced life
  2. Business Structure
  3. ACC
  4. Insurance

These are covered in more detail below.

1. Good business practice and a balanced life

Finding the right balance is a key way to manging risk. Finding that balance includes considering the following:

  • Diet, exercise and lifestyle balance
  • Partner, family and friend support
  • Colleague support
  • Good business team
  • Become financially savvy
  • Knowing my risks
2. Business structure

My Business Structure should be tailored to;

  • Best manage risk
  • Meets obligations and compliance
  • Best governance
  • Protects my assets
  • Ensure effective and efficient use of $, time and tax

If starting out and I am the sole income earner, deciding on a business structure is easier. As complexity is added (such as multiple business interests, significant personal assets) then proper consideration of my structure is needed.

In any event I should discuss this with my Business Advisor.

Types of Business Structures include;

  • Sole Trader
  • Partnership
  • Company
  • Family Trust

What is a Sole Trader?

A sole trader is a person who goes into business on their own and;

  • Usually, can begin trading straightaway without any formal process
  • Uses their own IRD number for the business including income tax and GST
  • Is the sole owner and is personally entitled to all profits but is also personally liable for all losses, taxes and debts

What is a Partnership?

A partnership is where two or more people join to run a business, usually;

  • Based on a partnership agreement
  • Share any profits or losses equally
  • Liable for any debt within the partnership
  • Needs to apply for a partnership IRD number including income tax and GST
  • Does not pay income tax; it distributes income to the individual partners who then pay income tax


One or more people can start a company. A company;

  • Is governed by a shareholder’s agreement
  • Is a separate legal entity from its owners
  • Owns all assets and liabilities of the business and is responsible for any debts. Shareholders liability is limited
  • Needs to apply for a company IRD number including income tax and GST
  • Has increased compliance and administrative obligations including Companies Office and IRD

Why Consider a Family Trust?

A family trust is usually set up to protect family assets (home) and ensure that those assets benefit the people and the way in which I want. This is an important consideration for sole traders.

If it is set up and run properly the family trust will usually offer protection from;

  • Professional liability
  • Financial problems
  • Relationship changes

Caution, a trust could be void if;

  • Set up to defeat the rights of creditors
  • Current couple’s relationship property has a negative impact on one of the partners
  • Residential care subsidy when gifting rather than selling

If you are thinking about a family trust, then talk to a lawyer

  • Ask for a no obligation meeting
  • Think about what assets I wish to protect
  • Who do I want to benefit (including myself or my partner) and how?
  • Gifting process
  • Make sure at the same time I sort out my will

Do I need a will?

  • Why “How do I want to look after my family”
  • When
    • Marriage or civil union
    • New business or Purchase major assets
    • Children are born
  • Who … for the benefit of my family
  • What
    • Distribute assets that I own
    • Special wishes or instructions
  • How
    • A lawyer can draft a will
    • Easy process and in most circumstances are free

If I don’t have a will or if it is not updated, then ….

  • Your wishes may not happen
  • Access to assets can take longer
  • May not be distributed in the way you had expected to your surviving family
  • Instructions contained in the last signed will … will be used
  • Upon marriage or civil union then any will in existence is revoked
3. ACC and Insurance

ACC LEVY (including CoverPlus and CoverPlus Extra)

ACC Levy Cover Plus (Nuts and Bolts)

  • Agreed accident and keeps me from working
  • Does not cover illnesses
  • 80% income replacement based on what I pay tax on
  • Contribution towards treatment and rehab
  • Based on historical earnings

ACC Levy Cover Plus Extra

  • I can determine what I insure for
  • ACC Levy is then based on the cover chosen
  • Full benefit of the cover (not 75%)
  • I can set a lower level of cover and use savings to buy other insurance cover
4. Insurance

There are a number of insurance types that should be considered and purchased to reduce the risks associated with my business.

Income Protection Insurance

  • Income stream if I am unable to work
  • Top up to ACC cover if an accident
  • 100% usually for illness
  • “Wait” period 4-8-13-26 weeks
  • “Payment” period is return to work, 2 years, 5 years or 65 years old
  • Monthly payment up to 75% of an amount chosen by me
  • Premiums are 100% tax deductible, but income is 100% assessable

Life Insurance

  • Chosen lump sum amount to be paid out in case of death or terminal illness
  • Usually covers most causes of death
  • Provides immediate cashflow requirements (living and debt) together with family life (study, house) and long-term help
  • Indexed to protect buying power
  • No cash or surrender value
  • Premiums need to be kept up to date
  • Requires evidence of health assessment

Mortgage Insurance

  • Cover my mortgage repayments if I have an accident, illness (including terminal) or death occurs
  • Usually includes repayment (chosen period of repayments) and life cover (balance of mortgage)
  • Wait Period is “4 weeks”
  • Payment period is 2 years, 5 years or term of the mortgage

Medical Insurance

  • Quick diagnosis and treatment to return to work quickly
  • Public system provides solution but is it quick enough
  • To help cover major medical costs including specialist testing and diagnosis
  • Access to private hospital treatment
  • There is a pre-approval requirement

Asset Insurance

  • Vehicle Insurance
  • Equipment Insurance
  • Clinic Insurance

Liability Insurance

  • NZCOM membership includes liability insurance cover
    • Professional Indemnity Insurance
    • Public Liability
  • Covers legal defence costs and awards to affected parties but not fines or penalties
  • Significant savings of $2000 per annum and lower excess

Insurance Tips

  • Talk to an insurance broker
  • Check out all the options to reduce premiums
    • include choosing a higher excess
    • a longer waiting period
    • a shorter policy term
  • Shop around and compare
  • Buy only what’s needed
  • Self-insure
  • Look after myself and stay healthy
  • Understand the value. Cutting costs is important, but it’s not all about premiums and price. What do I get for my money?
  • As my circumstances change it is important to review my level of cover to make sure I am not under or over-insured