20 Jun

2023

Financial Year End Procedures

End of year procedures need to be carried out to prepare your company file for the coming year. By closing the year in your company file, you are effectively bringing the company file up to date.

These include any adjustments you need to make to your company file so that it agrees with your accountants’ final records before you start a new year.

Review Your Debtors/Accounts Receivable

Companies will pay tax on all sales including those in your debtor’s ledger (i.e. those that owe you money but haven’t paid you by 31 March). Do any of your debtors need to be written off? Bad debts must be written out of the debtor’s ledger prior to balance date if they are to qualify for a tax deduction, and this may enable you to recover GST previously paid. The IRD require sufficient information supporting the debt as bad. Please contact us if you require assistance with this.

Employee Holiday Pay & Bonuses

Accrued holiday pay and bonuses are only a deductible expense if they are paid out within 63 days of balance date (i.e. by 2nd June for March balance dates). Therefore, if staff can be encouraged to take leave prior to 2nd June a deduction can be claimed for tax purposes.

Stock Take

At the end of each financial year, you are required to count and value your stock on hand. Now is the time to discount slow moving stock and dispose the obsolete stock to obtain a tax deduction.

Fixed Assets

Review your companies Fixed Asset Register to identify assets that may be scrapped or that are no longer used. In certain cases it is possible to claim a tax deduction for assets written off.

Assets can be written off if they are no longer used but have not been disposed of provided:

The asset is no longer used by you in your business or to produce income.

Neither you nor an associated person intends to use the asset in a business or in the future to derive gross income. And the cost of disposing of the asset would be more than any proceeds from disposing of the asset.
The asset is neither a building nor an asset being depreciated using the pooling method.

Assets costing $5,000 or less qualify for an immediate write-off provided: (this was part of the Covid tax relief package, for the period 17 March 2020 to 16 March 2021) then the amount drops to $1,000 from 17th March 2021.

They do not form part of some other asset.
They are not purchased from the same supplier at the same time as another asset and the total is more than $5,000.

Shareholder Current Accounts

If a shareholder current account is overdrawn at balance date (i.e. shareholder owes the company funds), this may result in a Fringe Benefit Tax liability. This means that the company is legally required to charge interest on this balance at interest rates prescribed by the IRD and the interest is then treated as income in the business and tax is liable on this interest. It may be advisable to credit a salary or dividend to the current account before year end.

Imputation Credit Account - ICA

Your company’s imputation year is from 1 April 2020 to 31 March 2021. Please ensure the ICA is not in debit at 31 March 2021. A debit ICA will attract a penalty.

Companies – Shareholding Continuity & Commonality

The ability to carry forward tax losses is subject to shareholding continuity of 49%. The ability to offset losses against the net income of other group companies requires common shareholding of 66%.

Note these tests must always be met and not just at year-end.

If you are anticipating shareholding changes and believe you will breach continuity, forfeited losses can be minimised by accelerating income recognition and minimising deductions where possible. Also, consider the payment of a dividend or making a taxable bonus issue to use imputation credits before they are forfeited.

The legislation in this area is set to change, with a same or similar business test enabling businesses to carry forward tax losses where they lack shareholding continuity of 49%, but the underlying business continues in operation. This is expected to be effective from the 2020-21 year

Goods and Services Tax

As part of your year-end procedures, a reconciliation between the entity’s GST return and the balance of the GST account in its financial statements should be undertaken. This reconciliation can provide a useful warning about any discrepancies and provide an opportunity to rectify any issues. Also, this reconciliation is generally requested by Inland Revenue as part of their audit procedures.

If there are unreconciled differences, we recommend a GST review be performed to identify possible system issues.

Individual Taxes

After 1 April, Inland Revenue will be automatically issuing pre-populated income tax returns. Where the individual confirms or Inland Revenue is satisfied the information is correct, a refund or tax bill will be automatically calculated. Due to the risk of error, it would be useful to have any pre-populated income tax returns reviewed by us prior to confirmation.

Brightline Test

Where residential property is held for five years or less (two years or less if the property was acquired before 29 March 2018), it may be subject to the “bright-line test” with any profits on sale subject to income tax. There is an exemption for the family home in most circumstances.

If you are considering selling residential property held for five years or less, or considering transferring ownership as part of a restructure, we recommend seeking advice first as the rules are complex and the consequences can be significant.

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ASWEFA has been benefiting from the outstanding service Tael Solutions has provided for a number of years. During these years ASWEFA has changed names, expanded from one company holding to 6 company holdings as we have franchised and developed 3 new sites and franchises. We not only contract Tael for monthly and annual account processing but they also manage our Trust accounts and IRD requirements. As well as this we hold quarterly financial meetings to have them assist us to explore and set financial goals and address areas of increased costings or potential sales opportunities to ensure we run at maximum capacity. These meetings involve looking at everything from staff capacity and future requirements to site/machinery/technical requirements to ensure we are future proofing our business as much as possible. They know our business well and can make observations with a fresh set of eyes that always provoke new thoughts and ideas. We are privileged to provide this reference and recommend Tael for any business big or small – but in particular if you are wanting to grow as they have become an integral part of our business and contributed to our success.

Treena Myers - ASWEFA Regional Office - Forklift training providers

I moved our law firm’s accountancy and business advisory work to TAEL Solutions over a year ago now and I have been consistently impressed with its energy, focus, and command over every aspect of how the business side of our practice operates and augmenting a better run, more efficient business. I highly recommend TAEL solutions to those looking to improve their business financial performance.

I moved our law firm’s accountancy and business advisory work to TAEL Solutions over a year ago now and I have been consistently impressed with its energy, focus, and command over every aspect of how the business side of our practice operates and augmenting a better run, more efficient business. I highly recommend TEAL solutions to those looking to improve their business financial performance.

Doug Cowan - Cowan Law

I wish I had found the team at Tael earlier! As a small business owner with minimal experience and understanding of Accounting and Bookkeeping, I've learnt a valuable lesson: 'surround yourself with the right people' The contrast between Tael Solutions and my previous firm couldn't be greater. They understand my business and provide the insight, recommendations and guidance that I so desperately needed. The team at Tael are a pleasure to deal with and I am confident that I'm in good hands.

Mike Covich - LocoMedia Limited

TAEL Solutions Ltd have been processing our accounts for two years now. For the first year they completed and prepared the annual accounts prior to auditing and for the second year we moved to full monthly accounts and looking after all tax issues, right through to Board Reports and preparation for auditing. As a Not for Profit organisation we especially appreciate the advice we get in regards to our responsibilities in our reporting for Community Services (Department of Internal Affairs) and our major grant providers. We are a small team and prefer to put our efforts into the provision of support services to our “kids” and their families. I would recommend Natasha and the team at TAEL Solutions to any SME or NFP requiring accounting services and professional support to help grow their business and to ensure that good accounting and governance practices are provided.

Keith Mackenzie - Chief Executive, Kidney Kids NZ

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Financial Year End Procedures

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