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End of Financial Year checklist

March 24, 2015

The 31 March 2014 year-end fast approaching and this is an appropriate time to consider some long-term tax planning initiatives and undertake some short-term measures to minimise tax for the current year.

THINGS TO DO:

  • Review doubtful debts and write off any bad debts prior to balance date. Bad debts have to be physically written off to not be taxable.
  • Holiday pay, long service leave and other employee remuneration such as bonuses can be deductible if paid during or within 63 days of the end of the income year. Make sure these are included in your creditors list.
  • Trading stock valuation issues; Identify obsolete stock and look to value at market selling value if less than cost. Write off any obsolete or worthless stock.
  • Assets identified as no longer useful. Sell or dispose of them prior to year-end to trigger loss on disposal. Defer disposal if depreciation is to be recovered.
  • Can you incur accrual expenditure such as consumable aids, prepayments, stationary etc now to claim a deduction.
  • Review income recognition policy. Any deposits received in advance of goods and services being provided will not be income. The same treatment will apply to retentions.
  • Can depreciable assets be broken down into component parts to obtain higher depreciation claims eg. building fit out, computer componentry, rental properties.
  • Unrealised foreign exchange losses in relation to short-term trade credits can be deductible by electing to treat short-term trade credits as financial arrangements.
  • Subvention payments for the previous tax year must be paid before 31 March to be effective. The IRD now accept that subvention payments can be made by book entries so long as the payment obligation is discharged.
  • Dividends are now required to have 5% withholding tax paid to Inland Revenue by the 20th of the following month. If company shareholders have taken cash out of the business on account of dividends yet to be declared, the dividend should be declared prior to 31 March and the DWT paid over to IRD by the 20th of April.
  • Your company's imputation credit account must be in credit as at 31 March each year. If you are planning to pay dividends to shareholders you will need to ensure that sufficient imputation credits are available. You may wish to consider paying company terminal tax due on 7 April before the end of March to maximise the available imputation credits.
  • You are required to keep a vehicle logbook if you are a sole trader or in a business partnership. Remember to keep a record of a representative three month period every three years.

Long term tax planning issues include the transfer of income generating assets including shares to family trusts. This can be particularly effective in mitigating the 39% tax rate in relation to dividend income from trading companies. There may also be opportunities to maximise interest deductibility by restructuring private borrowings.

Please contact us if you need any assistance with any of the above.


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