Preparing for the end of the Financial Year

The 31st of March is an important date for many taxpayers in New Zealand, and for many, can also be a very stressful one.

Here we share some ways that can help to minimise stress and maximise efficiency for the end of the Tax Year. 

1. Ideally balance sheet reconciliations occur monthly, but for many, these can be put on the back burner as more urgent items arise. Doing a quick check that the bank balance within the accounting system matches the bank statement and that the GST account aligns with the most recent filed GST return are simple but valuable actions that can save time.
2. Ensuring fixed asset balances in the trial balance align with the fixed asset register is another good year end check to complete.
3. While sorting out this reconciliation, why not check that the correct depreciation rates have been used for any additions during the year and check whether any assets that cost less than $1,000 have been expensed (to align with the low asset threshold for tax purposes).
4. Ensure all income has been recorded in the correct period. This may require moving some to income in advance on the balance sheet.
5. Filtering through expenses to reclassify any private or capital expenditure to the appropriate accounts and accrue any expenditure that is definitively committed and can be reasonably estimated, as it should be tax deductible.
6. Bad debts are only tax deductible if they are written off before year end. As such, have a scan of the debtors list, and if appropriate, complete the corresponding journals.
7. For shareholders in companies, to avoid paying interest on overdrawn current accounts a dividend of the balance outstanding should be declared before year end. This dividend might be able to be applied against the loan balance at an earlier effective date - eliminating the need to charge interest.
8. Ensure that any year end dividends do not push a company’s imputation credit account balance into debit as at 31 March; particularly given the third and final provisional tax payment may not be due until after 31 March (depending on the company’s balance date).
9. For provisional taxpayers, the third provisional tax instalment is not due until after balance date. As such, having the trial balance as accurate and tidy as possible will mean the amount to pay could be reliably estimated, thereby minimising interest and penalties.

The above requires time, proactiveness and motivation, and it may be frustrating and tedious in the short-term, but a few months into the new financial year when other unexpected priorities arise, your future self will be very grateful that you took the time to do these things. 

If you would like to discuss how our team can help you to make the end of the financial year easier, please contact us here. 

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