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Tax planning – 31 March 2012 Checklist

As the end of the 2011/2012 income tax year draws closer and the due date for paying terminal tax also fast approaching, there’s likely to be a list of issues for you to consider. Taking action now and ensuring your accounts are tidy and up-to-date before 31 March 2012 may help you reduce your tax liability. It’s often too late to offer the best advice after the year has ended.

Provisional Tax

If you know that your income is or will be much higher than 2010/2011, you may need to review your final provisional tax instalment, which will be due on May 7 2012. If you’re concerned, please call us and we’ll carry out a quick review of your position.

Trading Stock

If you carry more than $10,000 in stock, you must undertake a physical stocktake on March 31 to confirm the value of it. Your stock should be valued at the lower of its cost or realisable value and you should identify obsolete stock. If you carry less than $10,000 stock you can decide to value it your opening stock value and will not need to carry out a stocktake.

Business Expenses Paid From Personal Funds
It’s very easy to overlook business expenses that you’ve paid from your own funds. Now is a good time to identify these and ensure that you’ve reimbursed yourself or have recorded them.

Bad Debts

Review your accounts receivables (“debtors”) as you’ll only be entitled to claim a bad debt write-off if you have actually written it off in your books BEFORE 31 March 2012. Further, you must retain suitable evidence that you’re carried out reasonable steps to recover the debt before you write it off.

Employee remuneration

Amounts owing to your employees as at 31 March 2012 (which may include holiday pay, bonuses, etc) may be claimed as deductible in the 2012 income tax year. But you must pay them within 63 days of March 31, which will be June 2 2012.

Review your balances now as delays in paying these balances beyond June 2 could have a surprisingly dramatic impact on your 2011/2012 income tax liability.

Shareholders’ salaries and bonuses must be paid by 31 March to be deductible. PAYE on these payments must be included in your March 2012 payroll schedules and paid to IRD by April 20 2012.

Fixed Assets

Review your fixed assets schedule to ensure they are up to date and accurate, ensuring all purchases, disposals & scrapped assets are included.

You do not need to include purchases you’ve made for less than $500 plus GST in your schedule. They can be treated as a “low value asset” and treated as an expense.

You can write off any assets that aren’t used in your business anymore; and you do not intend to use it in the future; and the cost to dispose the asset exceeds its disposal value.

Repairs & Maintenance

If you have any repairs or maintenance work that you’ve been contemplating, consider getting it started before 31 March 2012 so you can claim the deduction in the 2012 tax year.

Shareholder Current Accounts

If you operate as a company, check to see if your shareholder current accounts have overdrawn balances as they could cause FBT issues. Although we usually look at this when we prepare your statements and tax returns, if you’ve taken substantial drawings from the business, please contact us know so we can advise you on how to deal with them before 31 March.

Donations & Childcare Expenses

Start collating your donation & childcare receipts for the 2011/2012 income tax year as you’ll be able to claim for approved donations over $5.00 if you have a receipt. You can also claim a deduction for some childcare costs.

Prepaid expenditure

You may have already paid for some expenses in this income tax year, even though a portion of the expense relates to the 2012/2013 income tax year. IRD allows some types to be claimed in full in the year that it was incurred, even though the goods or services won’t be used in that year. Examples include: Stationery; insurance, etc. Therefore you may want to consider prepaying some of your expenses before March 31. If you’re GST registered and on a cash-based system, you’ll also be able to reclaim the GST sooner.

We recommend that you collate your accounting records promptly after 31 March 2012, whilst it’s fresh in your mind. Ensure that you reconcile your bank accounts with your cash book if you’ve kept one; list your debtors, creditors, work in progress and stock at 31 March 2012; file your GST returns & working papers and record any home office expense details. Finally, ensure that your documentation such as bank & credit card statements, sales invoices & creditors’ invoices are filed methodically.

Disclaimer: This article is of a general nature only and covers only a few of the items needed to consider in year-end tax planning. You should not rely on it as specific tax advice or as a comprehensive guide and it should not be relied upon for that purpose.

There are many issues to consider before March 31.  Please contact one of our business advisory services team before then.

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