With end of financial year only a month away, have a read of our checklist below to check if there is anything you need to do to be prepared.
If you have any accounts receivable that you don't think you're going to receive, consider writing it off before the end of the tax year so that a tax deduction is claimed in this tax year. Otherwise, you will have to pay tax on income that you haven't received. To do this in Xero, click on the invoice and click "add payment" and select "bad debts" as the account.
If you have any repairs and maintenance that needs doing, now is the time to do it to get it into this tax year. It doesn't need to be paid this tax year, but it does need to be "incurred" which means the work needs to be done. If you're unsure whether it is repairs and maintenance (generally deductible) or improvements (capital items which need to be depreciated over their useful life) give us a call.
Throw out any obsolete stock, or write it down to its net realisable value (the lessor of cost or market value). Carry out a stock take at year end, and record the closing value. If your stock value is less than $10k and your turnover is less than $1.3m, you do not generally need to account for stock movement.
If you keep a log book, now is a great time to get it up to date. Don't forget if you are apportioning motor vehicle expenses, you need to keep a log book for 3 months and repeat this process at least every 3 years, or if your business use of the vehicle changes by more than 20%.
Check if you have any fixed assets that should be written off or disposed of, to get any write offs into this financial year.
Some minor expenses can be pre-paid, so consider getting your RUC up to date or a little in advance, tank up your vehicle, and purchase any stationery or small items that you'll need in the near future. Let us know if you want to check if an item will be deductible or if a prepayment adjustment will be required.
If you trade through a company and your shareholder current account is overdrawn at the end of the year, the company is required to charge you interest at (quite high) rates set by IRD. As such, it is a good idea to check how your drawings are tracking against your profit or usual shareholder salary, and look at whether you should slow your drawings for the last month of the year to avoid going overdrawn. In addition, for most people terminal tax is on 7 April, so if you are paying this from the company account, delay paying it until after 31 Mar. If you need any assistance get in touch.
The best time of the year to change business systems is 1 April, because then it is a clean break, with no tax year split across two systems. As such, if you're considering an upgrade to Xero, or a change in your payroll system, now is the perfect time. Xero is offering special deals at the moment, so if you want to take those up, or need assistance converting, don't hesitate to get in touch.
Similarly, if you are looking at any restructures or changes to your business, 1 April is a great time to put these into effect so there is a clean break. Contact us for a business health check, to help identify changes which could improve your profitability, minimise risks, and protect your assets.
If you think your profit is either up or down a lot for the last tax year, we recommend that you get in touch so we can prioritise your financials statements and tax returns. In the case of profit being down, getting your returns done earlier enables us to tweak your final provisional tax instalment as well as getting you any refunds due earlier. If your profit is up, it means we can work out the taxes due and give you longer to plan for these before they are payable. And if you just need them urgently for another purpose, don't hesitate to get in touch either.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
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