Year End Tax Planning

It’s only two months now until the tax year finishes for most small companies in New Zealand.  

Although this seems far off, its often right in the middle of busy season when businesses are just starting to kick off again, so the time can fly by!  Clients sometimes get in contact to ask about year end taxes during February and March, so we thought this post might be useful for helping to prepare your startup for the end of the financial year.


Is March the time to spend?


The school of thought on this is that if you bring forward expenditure into February and March, from later in the year, you might be entitled to a tax deduction a year in advance.  Next year you do the same thing, and whammy, a lower tax bill all around.


While we love the sentiment, here’s why that’s not a great idea:

  • When you’re buying assets its only the depreciation that will be brought forward - often only a small % of the original transaction will benefit this year
  • Often leads clients to spend more on an asset than they usually would, erasing the benefit instantly!
  • You need to be able to afford it, and the cash flow troubles this kind of spending can throw up will outweigh any tax savings brought forward

So please don’t go go crazy in February and March just to save on tax, make buying decisions based on whether its good for your business, first and foremost.


Saving for taxes


Your bright and shiny startup has the most technically advanced accounting system on the market.  Daily bank feeds, up to date reconciling and regular reviewing of reports in Xero means you can review your performance during the year to see where you are at in comparison to prior years, and make an assessment of what taxes for the period might be.  

Notwithstanding you being in the provisional tax regime you should still be looking to see where you are at for this year, and talking to your tax professional as to what taxes might be like.  This allows you to get an idea of what the upcoming provisional taxes and terminal taxes might be due, and when they are due, and start putting funds aside.



Crediting Bad Debts


Has someone not paid you for a long time?  Don’t think you will ever get paid?  Consider writing off the debt before the 31st of March to get a deduction this year.


Collecting Records


Your accountant will more than likely ask for verifying copies of things like: end of year bank statements, yearly interest summaries, and dividend statements.  Get these while they are fresh and upload them into Dropbox, Evernote, Google Docs, or even send them into Xero for easy access later.


Home Office Expenses


Home office costs that are incurred for business purposes will be personal expenses in nature, so they won’t be easily accessible in your accounting system.  Make sure you collate all your personal expenses (mortgage interest or rent, insurance, rates, power, telephone and internet) and enter these into an expense claim in Xero for easy access later.


Overdrawn Shareholder Current Account


If you’ve taken money in the form of drawings of a loan from the company during the year, and you owe money to the company, we recommend the repayment of the shareholder current account by means of a cash transaction, shareholder salary, or a dividend.


Those are the things we can think 

Disclaimer: Information provided to the best of the authors knowledge at time of publication.  Laws are subject to change and independent advice should be sought.  The above information is general in nature and should not be construed or relied on as a recommendation.