Let’s Talk … End of Tax Year Planning

With the financial year end approaching for many business people, now is a great time to utilise some relatively simple tax planning tools to minimise your end costs.

Prepaying Expenses

If you prepay certain expenses before balance date, a tax deduction is available in that tax year. These expenses include stationery, postage and courier charges, vehicle registration, road user charges, rates and newspaper subscriptions.

Larger items such as rent, consumables, insurance premiums, professional or trade subscriptions, travel, advertising, periodic charges and services, can be claimed but there are limits and conditions that apply. For farmers, consumables include items like feed, fertiliser and animal health products; a call to your accountant will set you on the right track with these. The limits for this type of expenditure are relatively high and can be extremely helpful for tax planning in high income years.

Stocktakes

Make sure a stocktake is planned and carried out. If your annual turnover is less than $1.3m and your stock is less than $10,000, you do not need to carry out a physical stocktake. However, livestock is not covered by this concession.

Accounts Receivable

Review your accounts receivable ledger and ensure any bad debts are written off prior to the balance date. The rules are specific - the debt must be written off before balance date. If you don’t do this, you are effectively paying tax on money you will never receive.

Credit Notes

If a credit note is issued to a customer after the balance date, reducing the amount they owe you, let your accountant know. Again, this will ensure you are not paying tax on money that you will not receive. 

Assets and Repairs & Maintenance

Now is also a good time to review your Fixed Asset Schedule and identify assets that can be written off.

Useful considerations to discuss with your accountant:

- If you are thinking about purchasing or selling an asset prior to balance date - the timing of depreciation claims and recoveries can have an impact on your end of year tax liability.

- Where significant repairs and maintenance are planned on major assets - give thought to bringing this expenditure forward.

Accounting Software

If you are using your own accounting software, make sure that all year end procedures and roll over instructions are followed.

Income Fluctuation

If you feel your income is significantly higher or lower than the previous year, it would be beneficial to have your accounts completed sooner than later to enable more accuracy with your provisional tax payments and for any refunds to be received sooner.   

Remember that your accountant is there to support you and your business - to ensure you comply with your tax obligations, and to ensure you pay the minimum amount of tax you’re legally required to. For further local and professional advice, feel free to contact us here at MCI; we’re in your corner.