Are you prepared for the new financial year?
We have a month left to the end of the financial year. Now's the time to think about how to minimise tax, and plan for the year, especially if it's been a boomer. Here are some things to think about:
1.Review the year-to-date numbers: If you haven't already checked the past 11 months of trading, do so now. Average the profit out and work out what your profit and tax might be for the year and see how much extra you might need to save.
Do you need to make an extra voluntary payment to top up your taxes? Maybe you have paid too much tax and might get some back? A tax calculator is on the IRD website to help you with the tax calculation.
2.If you cannot review your numbers or are relying on Excel for your accounting, make a plan to kick into a real accounting system for April 1. Get advice on which is best for you, but for most businesses, Xero is a great software option.
It's cloud-based, paid via a monthly subscription and even works on your smartphone and tablet.
This means you can even do some bookwork while waiting for a WOF at the testing station.
3.Plan: Put a budget in place. Factor in the new tax payments. Set goals for the new year. Think about what tasks you can delegate - hire help. Do you need an overdraft and does the bank need to be in on your plan? Plan for profit.
4.If taxes are overdue and are a problem, sort them out now: Interest rates are indicated to rise this year - and so will the interest IRD will charge if you have debt with them. Coming to an arrangement will at least hold the penalties. Factor these payments into your budget.
5.Talk to your accountant about what you can do to minimise your taxes.
Don't instantly assume that going out and buying a new work vehicle will substantially reduce your tax bill.
Some of the suggestions your accountant may have may be along the lines of deferring invoices to clients until after March 31, selling or liquidating old stock, writing off assets in the asset register, writing off old debt that is unlikely to be collected and claiming holiday pay paid to employees 63 days after balance date.
Why not invite your accountant out for lunch and have a chat with them about the plan for next year? It will be tax deductible. Happy new financial year.