By Susan Wynne & Andrea Scatchard
As another tax year draws to a close (for those with a standard 31 March balance date) there are some key things to keep in mind.
Bad debts
If you have debtors who are unlikely to pay you, these can only be treated as deductible bad debts if they have been fully written off in your accounts before year-end.
Imputation credit account
For companies, your imputation credit account should have a nil or credit balance on 31 March, regardless of your financial balance date, as a debit balance on 31 March will result in penalties. This should be carefully monitored, especially if:
- you have paid out imputed dividends;
- you have received tax refunds; or
- there has been a loss of shareholder continuity.
Depreciation
Check your fixed asset register to ensure the correct Inland Revenue tax depreciation rates are being used. New assets should be depreciated from the beginning of the month of acquisition, rather than from the date of purchase. Pooled assets can be depreciated from the start of the year of acquisition. If you are writing off assets, make sure they are disposed of by year-end.
The ability to claim tax depreciation on commercial and industrial buildings is expected to be removed effective 1 April 2024 for 31 March balance date taxpayers. Check your fixed asset register and consider whether you need to update the depreciation rates of any relevant building assets. Businesses with significant building assets may need to consider the effect of increased taxable income on future forecast tax payments.
Low-value assets
Assets that cost less than $1,000 are considered “low-value assets” and can be immediately deducted, rather than depreciated. If multiple low-value assets are purchased at the same time from the same supplier, the combined cost must be less than $1,000 for the immediate deduction to apply.
Trading stock
Obsolete trading stock can be valued at market selling value where this is lower than cost and you can substantiate the valuation.
Tax Losses
Be aware of the rules regarding shareholder continuity and business continuity if you have losses to carry forward. Breaching both during the year can result in your tax losses being forfeited.
Fourth-quarter FBT returns
31 March is also the end of the FBT year, regardless of your financial balance date. Annual FBT returns and returns for the March quarter are due to be filed by 31 May 2024. If you have not done so in the past, you should consider using the various alternate rate options available to reduce FBT payable from the standard 63.93% rate.
GST mixed-use taxable and non-taxable supplies
If you are GST registered and have assets that are used to make both GST taxable and GST exempt or non-taxable supplies, you may need to make an annual change of use adjustment in the GST return period that includes your balance date.
Tax pooling
With the Inland Revenue use of money interest rate currently at 10.91% on outstanding tax payments, it may be prudent to consider using tax pooling to reduce the effective rate of interest. Tax pooling can also provide the flexibility to make your tax payments at times that suit your own cashflow patterns.
Tax on KiwiSaver contributions
If you have employees, you need to review the ESCT rates that apply to your employer KiwiSaver contributions as these may change on 1 April based on earnings levels over the last 2 years.
Year-end is a busy time, so if you have any questions or would like help with any year-end tax issues, take away the stress by talking to your usual Deloitte advisor.
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