Column: Time to sort out taxes

Tax time perfect for sorting out

Without  wanting to sound like the proverbial cracked record, when it comes to tax, timing is everything so right now businesses should be getting their affairs in order for the March 31 year end.
Waiting months after year end to find out your tax liability is simply unwise;  getting in early means you can  capitalise on any tax deductions you're entitled to in this tax year, elect the best tax methods or systems for the next one and avoid any nasty tax surprises.
To make life easier, it's best to have your information in digital format - a much more efficient system that produces analysed information in electronic form.
It should include all loan documents and invoices for asset purchases, GST return details for the year, overseas dividends and interest withholding tax deduction certificates for interest earned.
Some of the key factors to be considered for a year-end check include:
Bad debts - These must be written out of the books before balance date to qualify as a tax deduction. If you are on an invoice basis for GST, remember to claim back the GST you have paid.
Stocktaking - Not needed if stock can be reasonably estimated at less than $10,000, just provide your estimate of value. Otherwise remember to value stock at cost excluding GST. Consider prepared stock sheets in a spreadsheet to make calculations easier.
Fringe benefit tax - Should you be paying FBT, do you qualify for the exemptions? It can be cost-effective to pay FBT and claim the relevant expenses and GST.
Prepaid expenses - Certain expenditure can be prepaid, if expensed for financial reporting purposes, and claimed as a deduction when paid. Some expenses can be deducted regardless of the amount or period being prepaid - for instance stationery, subscriptions for papers/journals, rates or accounting/audit fees. Others may be subject to monetary and time limits - such as rent, consumables, advertising, travel and accommodation.
Provisional tax payments - If you underpaid your 2010 provisional tax, then most businesses with a March 31 year-end will have until early June 2011 to purchase  additional 2010 tax payments through an intermediary to save interest and penalties.
Payroll - If payroll is a significant cost it is wise to check that your business complies with the legislation. Note that from April 1 this year penalties can be applied if an employer cannot produce an individual employment agreement for each employee or a collective agreement.
Extension of time - If you use a tax agent and your 2010 return has not yet been filed, this should ideally be filed before March 31  to avoid losing the benefit of the extension of time within which to file tax returns in future. Late filing penalties may also apply.
Employees - For wage earners, tax deductions are generally only available for tax return preparation fees and insurance premiums for income protection insurance, where income is a relevant factor in determining the amount insured. The proceeds of such policies are taxable income.
Especially for companies:
Imputation - Irrespective of a company's year-end, you need to make sure that the company's imputation credit account is in credit at  March 31,  to avoid the requirement to pay the debit balance with a 10 per cent penalty to IRD.
As you see, some of the above rules can be complex, so check with your tax adviser if you are unsure  what you need to do.
 - Stephen Graham is a partner at BDO Rotorua chartered accounting and advisory firm