Tax Tips end of financial year

Tax Tips end of financial year

We’ve put together some tax tips for end of the financial year that we hope you’ll find helpful. Tax can be a nightmare but with careful planning and an accountant who is up to date with changes in tax law, it should be a breeze. It could be useful to keep this handy as you are getting your paperwork together.

Bad Debts

In order for a bad debt to be truly “bad”, there must be no reasonable expectation of recovery. There must also be evidence that a bad debt has been written off. Normally this would involve a paper trail between you and the customer or potentially an action in the Disputes Tribunal.

In order to claim a bad debt, it must be written off during this year in order to claim the deduction. We can do this for you when preparing your financial statements.

Inventory

You are entitled to write off obsolete inventory (or stock). In order to reduce the value of items in stock, they should be disposed of physically or alternatively valued at their market selling value which will presumably be lower than cost.

Repairs and Maintenance

If you have repairs and maintenance that need to be done, it may be worthwhile to do these in March so that you get the benefit of a full deduction.

Home Office Expenses

A proportion of your mortgage interest, residential telephone, insurance and rates can be deductible. There is a common misconception that this amounts to a flat 25%. This is not the case. In the case of an IRD audit, the department would want to see evidence as to how the portion deducted was determined. Our advice is to get a sketch together of your home with floor areas and work our how much is actually dedicated to business use. Call us for more information if you are unsure.

Donations

Most clients are aware that their personal donations are tax deductible but your business donations may be as well. So long as the company records a profit, you may claim any donation up to that net income figure.

Scrapping unused assets

You may write-off an asset that you are currently depreciating when the costs of disposing of it are greater than any expected proceeds from the sale.

Prepaid Expenses

You can claim the full amount of some “prepayments” regardless of the amount or period being prepaid. Items include:

  • stationery
  • subscriptions for journals
  • road user charges & vehicle registrations
  • postage and courier charges
  • rates
  • audit & accounting fees

Other expenses such as travel, rent, consumables, advertising and insurance have either dollar or time limitations so please contact us for more information.

Entertainment expenses

Most entertainment will qualify for a 50% deduction. There are a whole host of rules that apply so if you are uncertain, give us a call.

Vehicle expenses

There are a number of ways of claiming the business portion of vehicle expenses against the business. These include a mileage rate, using a logbook, actual mileage and transferring the ownership of the vehicle into the business name.

If you are unsure, contact us for more information.

Angus is the CEO and founder of Generate Accounting.