Five tips to prepare for end of tax year


#1

With the end of the financial year fast approaching, you’ll need to start planning now to ensure you wont need to frantically crunch the numbers to meet the deadline.

Here are some tips to make the process as smooth as possible, plus tricks to boost your cash flow:

Don’t wait to buy capital items

If you buy bigger ticket items now, you’ll still be able to claim depreciation on this year’s tax claim. Anything that is purchased after March 31 cannot be claimed until next year.

Suppliers often offer end of financial year deals. If you can buy now but pay later, your new purchase will officially hit your books before end of tax year.

Be disciplined

The best way to avoid last minute panic before your return deadline is to keep your accounting records up-to-date throughout the year, but that’s often harder than it sounds.

Even if you’re keeping your accounts up to date on a weekly or monthly basis, there are a few additional things you can do to streamline the year-end process. Talk to your accountant as soon as possible and agree on a deadline for having your accounts to them for closing and sign off. Using a computerised accounting package can save you a lot of time and hassle every day, not just at the end of the financial year.

Write off poor-performing assets

Now is the time to free up old stock and assets you no longer require. Old computers, out-dated machinery and equipment are the biggest offenders. These can be sold and converted into cash.

Write off poor performing stock stuff  you can’t sell. It will increase your cost of goods sold and reduce your taxable profit.

Get the small stuff right

Is there any upcoming work you can invoice in April, rather than March? It means the income gets counted in next year’s profit, not the current year.

Make sure you claim home expenses if you operate any part of your business from home. This is an added expense for your business, reducing your taxable profit.

Estimate your profit now

If you estimate your profit now, you’ll get a clear idea of your cash situation – so you can save for a rainy day or splurge on items your business needs. The sooner you are able to do this, the sooner you can identify areas that require attention and implement the changes needed to turn things around.

You might have been lulled into a false sense of security by turnover that was rising month-on-month, but failed to notice that net profit was declining as costs rose at a faster rate than turnover.

If your profit has been increasing, then you may need to pay more provisional tax, interest penalties, or you could have a nasty surprise at terminal tax time. The key is knowing what you need to pay well in advance.


#2

This is probably a little off-topic in that it’s not really banking related, but I’ve just started working on a casual basis whereby I provide a service to an organisation on a casual basis, which means I’ll have to declare tax at some point for this tax year. I’m not GST registered - I basically just provide this service and they pay me (they have my IRD number etc.), so the IRD will definitely be expecting to hear from me, but I’m not really sure where to start! Do you have any tips on doing tax for someone who’s new to doing it themselves? It’s not feasible for me to hire an accountant because the work is so casual and infrequent that it wouldn’t be worth the cost.


#3

Hi Rie
Did you know that the IRD hold free tax seminars and workshops designed specifically for people in business? Here is the link to their site which shows the locations of the workshops around the country depending on where you are based: http://www.ird.govt.nz/contact-us/seminars/
The IRD site also has a series of ‘introduction to business’ videos which include links to further content that might give you the answer you are looking for: http://www.ird.govt.nz/help/demo/intro-bus-vids/
I hope this helps!