8 Things to check before the financial year end

Haven Accounting | 3 MIN READ March 1, 2023

31 March – what do I need to do before then?

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The 31st of March for most New Zealand small businesses, whether companies or sole traders, means the end of the financial year and there are a few things that ideally you consider before 1 April so that you can take the tax planning opportunities into the 2023 tax year end, not the following year.

Accruals and Expenses

If you have committed to an expense then it is deductible in the 31 March 2023 accounts. If you have committed to the amount then you can accrue it and pay it in April or May 2023 but still take the tax deduction in March 2023. The one exception to this is employee expenses. The employee expenses such as commission or bonuses that relate to the 2023 year must be not only incurred but paid within 63 days of balance date (that’s 2 June 2023).

Bad Debts 

In order to take a tax deduction, the bad debt must actually have been written off on 31 March 2023. It is not acceptable to book the journal in April 2023 as part of the account preparation work.  Make sure you retain evidence that the debt was, in fact, bad – i.e. debt collection attempts

Trading Stock

There are 2 options to value stock, the lower of cost or market selling value. Where the market selling value is lower than the cost it is beneficial to revalue the stock at balance date to this value. Again, like the bad debts, you need evidence of the market value of the stock at 31 March 2023. The IRD prefers valuations by qualified persons, not necessarily external to the company. These valuations should detail actual sales leading up to and after 31 March 2023.

Donations

If you haven’t paid that donation, including school fees, you have been thinking of, paying it in March 2023 is a good time.  The donation rebate form gets filled in and the rebate paid once your tax return is also filled. If you pay the donation in April 2023 you will need to wait until the end of the March 2024 year to claim the rebate.

However, if you have no taxable income in the 2023 year then it may be best to pay the donation in the following year as once there is income then the rebate can be claimed, or the amount expensed if a company.

Shareholder current accounts

If the company is owed money by its shareholders, consider paying shareholder-employee salaries or paying a dividend. Where the shareholder current account is an asset on the company accounts then there may be fringe benefit tax or deemed dividend issues.

Imputation Credit Account (ICA) balance

Time to make sure that the ICA does not have a debit balance on 31 March 2023. If it does, penalties will be incurred. It’s an easy fix, make a voluntary tax payment to clear the debit. Most likely a payment needs to be made on 7 April 2023 anyway.

Assets

Review your fixed asset register and if there are assets that you no longer have, they broke, died or you sold them, write them off in the 2023 accounts. If a loss on disposal was made then a deduction can be taken.

File your 2022 income tax return

If you haven’t filed your 2022 income tax return then you must file it before 31 March 2023, if you have a tax agent. If you received your accounts and tax return but haven’t returned them, then it’s time to do so to ensure they are filed on time.

If you want help with getting things sorted for the end of the tax year, don’t hesitate to contact the Haven team, we would love to help you out.


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