As the end of the financial year approaches, it’s crucial for businesses and individuals in New Zealand to ensure their financial records are in order and tax obligations are met. The New Zealand tax year runs from 1 April to 31 March, and preparing for the year-end can be a daunting task. This article will guide you through the essential steps to take and best practices to ensure a smooth and compliant year-end process. This is not intended as advice, contact your accountant or iNZvest with any specific questions you have.
Understanding the New Zealand Tax Year
The New Zealand tax year begins on 1 April and ends on 31 March of the following year. This period is critical for individuals, sole traders, companies, businesses and property owners to review their financial records, ensure compliance with tax laws, and prepare for the upcoming tax year.
Preparing for Tax Year End: Best Practices
Review and Reconcile Financial Records
Ensure all financial transactions are accurately recorded and reconciled. This includes bank statements, invoices, receipts, and any other financial documents. Regular reconciliation helps identify discrepancies early and ensures your financial records are accurate.
Conduct a Stock Take
If your business holds inventory, conduct a stock take on 31 March. This involves counting all inventory items and recording their value. Accurate inventory records are essential for calculating the cost of goods sold and determining taxable income.
Write Off Bad Debts
Identify any bad debts that are unlikely to be recovered and write them off in your accounting records. Writing off bad debts can reduce your taxable income and ensure your financial statements accurately reflect your business’s financial position.
Review Fixed Assets
Review your fixed asset register and write off any assets that are no longer in use or have been disposed of. This helps ensure your financial statements accurately reflect the value of your assets and can also reduce your taxable income.
Prepare and File GST Returns
Ensure your GST returns are up to date and filed on time. The final GST return for the tax year ending 31 March 2025 is due on 31 March. Accurate and timely GST returns help avoid penalties and ensure compliance with tax laws.
Accrue Expenses and Income
Accrue any expenses that have been incurred but not yet paid, and any income that has been earned but not yet received. This ensures your financial statements accurately reflect your business’s financial position at year-end.
Review Payroll Records
Ensure all payroll records are accurate and up to date. This includes employee wages, PAYE deductions, and any other payroll-related expenses. Accurate payroll records are essential for compliance with tax laws and for preparing year-end financial statements.
Consult with a Tax Agent
Consider consulting with a registered tax agent or accountant (contact iNZvest for assistance with this). They can provide expert guidance, help you navigate complex tax laws, and ensure you maximize deductions and credits. Using a tax agent can also extend your filing deadlines, giving you more time to prepare your tax returns
Preparing for Tax Year End: Specific Considerations
For Sole Traders
As a sole trader, your business income is taxed as part of your personal income. This means you need to:
- Keep accurate records of all income and expenses.
- Claim deductions for allowable business expenses.
- Track and pay Goods and Services Tax (GST) if your turnover exceeds $60,000 per year.
For Businesses
Businesses need to:
- Ensure all financial transactions are accurately recorded and reconciled.
- Conduct a stock take and review fixed assets.
- Prepare and file GST returns on time.
- Accrue expenses and income.
- Review payroll records and ensure compliance with tax laws.
For Property Owners
If you own rental properties, you need to:
- Keep accurate records of rental income and expenses.
- Claim deductions for allowable expenses, such as interest, depreciation, repairs, and maintenance.
- Track and pay GST if applicable.
Final Tips for Everyone
- Stay Organized: Keep all financial records organized and easily accessible. This includes invoices, receipts, bank statements, and any other financial documents.
- Plan Ahead: Start preparing for the year-end well in advance. This helps avoid last-minute stress and ensures you have enough time to address any issues that arise.
- Stay Informed: Keep up to date with any changes in tax laws and regulations. This helps ensure compliance and can also help you take advantage of any new deductions or credits.
- Seek Professional Help: Consider consulting with a registered tax agent or accountant. They can provide expert guidance and help ensure you meet all your tax obligations
Conclusion
Preparing for the accounting and tax year-end in New Zealand requires careful planning and attention to detail. By following the best practices outlined above, you can ensure your financial records are accurate, your tax obligations are met, and you are well-prepared for the upcoming tax year. Remember to stay organised, plan ahead, and seek professional help if needed.