The Northland Age

Preparing for the end of the tax year

- By Stewart Russell, PKF Francis Aickin Ltd

For most businesses the end of the tax year is only a couple of weeks away. So, how has the year been to date? Do you know? Just because there is no cash, there may still be a profit, particular­ly if lots of people owe you money, or you have been repaying borrowings during the year.

There are some actions a business can take to legally help minimise its tax bill: 1. Prepay some bills. Some expenses can be claimed when they are paid, rather than used. If you’re planning that overseas conference to Australia, if you pay it now, you will get tax relief now rather than next year. Consider also insurance, rates etc.

2. Consumable­s. This may be stockpilin­g stationery, consumable­s, fertiliser, feed and fencing material.

3. Staff holiday pay and bonuses, providing they are paid within 63 days of the year-end.

All of these methods have a cash cost to the business, and there are dollar value restrictio­ns and time limits which apply. So, although they reduce the tax, they also reduce the cash the business has available.

Only spend on items you want or need. There is no point spending a dollar on something you don’t really need just to save yourself 28 or 33 cents in tax.

Remember that if you buy a fixed asset, such as a new ute or tractor near year-end, only a tiny portion of this will be tax deductible.

There are, of course, the things you should do every year, such as reviewing the list of people who owe you money. If you believe that any of the debts are bad, you need to write them off in your books before your year-end date to get tax relief.

When performing the year-end stocktake, ensure you only value usable stock. If something is damaged or obsolete, make sure it is clearly identified and valued accordingl­y.

Review the fixed asset register, if there are items that have been scrapped, broken or stolen, ensure they are noted on the fixed asset register.

You should consider whether you are claiming everything against the business which you are entitled to.

For example, do you store the business records or stock at home, meet clients or do your paperwork in the evenings? If so, you are able to claim an appropriat­e proportion of your household bills.

Have you paid any expenses personally such as trade subscripti­ons, travel expenses or membership­s?

In our business, this is what we term a Tax Minimisati­on Review. This is a formal process which we use to ensure you are completing your tax returns correctly, claiming all valid business expenses and have the business structured tax effectivel­y.

Farmers, fishermen and some foresters are able to take advantage of the income equalisati­on scheme to smooth income between years

As is always the case with tax advice, each individual, company, business, family trust or partnershi­p is different.

Please speak to your tax adviser or accountant to discuss what works for you, given your specific circumstan­ces.

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