Reduce your tax with these year-end tax planning tips. The more prepared you are, the smoother the process and the better the result.
Bad debts – Write bad debts off in your debtor ledger before balance date so you can claim a deduction. Your records should show you have taken reasonable steps to recover the debt before writing it off. Make a note of the details so we can check the GST adjustments.
Employee expenses – You can claim deductions for holiday pay, bonuses, redundancy payments and long service leave if you commit to them before year end and pay them within 63 days of balance date. Check holiday pay has been calculated correctly.
Expenses – Can you pre-pay expenses such as stationery, postage and courier charges before 31 March? You may be able to claim them. Check with us because there are limits on some prepaid expenses such as rent, insurance, maintenance contracts, travel and accommodation.
Fixed assets – Review your Fixed Assets. Can you sell or scrap the ones you no longer use?
Prompt payment discounts – If you maintain a discount reserve, it may be deductible. A deduction of the actual discount percentage is allowed in the first year. In subsequent years, the deduction is calculated as an approved percentage of debtors. Different rules apply if the credit period offered is more than 93 days.
Repairs & maintenance – Do planned maintenance or repairs before year end for a tax deduction. Deciding whether expenditure is maintenance (deductible) or capital (non-deductible) is not always clear. Ask us if you’re not sure.
Stock – Do a stocktake. Dispose of obsolete stock by year end or write it down to its net realisable value (the lesser of cost or market value). If your stock is worth less than $10,000 and turnover for the year less than $1.3m, you won’t need to include your stock movement for tax purposes.
Vehicles – Make a note of your odometer reading on 31 March. Check your logbook is up to date if you are required to keep one.
Credit notes – Look for credit notes issued to customers after balance date but related to sales before balance date. Make a note of them so you can reduce your taxable income for the current year.
Customers deposits – Deposits received are not income until the year the services or goods are supplied. Make a list of deposits at balance date for services and goods to be supplied in the next tax year.
Increased income – Is this year’s income higher than last year? If so talk to us. You might need to make a voluntary provisional tax payment.
Losses – Did your group of companies have losses last year? If so, you must make loss offset elections and subvention payments by 31 March this year.
Retentions – Retentions aren’t taxable until the year the retention period expires. Make a list of retentions you have invoiced and which are not receivable till the next tax year.
Dividends & imputation credits – Review planned dividend payments. Your imputation credit account must be in credit at 31 March or penalties may arise. Contact us before 31 March so we can help you.
File your return and pay your taxes on time. Don’t waste your hard earned cash on unnecessary penalties and interest.
Contact us if you need help or have any questions. That’s why we’re here.