It’s that time again where businesses need to start getting their records ready for their accountant to prepare their annual accounts and tax returns. Investing time to gather all the information needed to ensure your records are clear, complete and concise can reduce the amount of time your accountant needs to spend preparing your annual accounts – which should result in a smaller accounting fee!
Hayes Knight provides you with a comprehensive questionnaire and detailed listing of all records and information required to help you gather all the information we need.
Typically the big items are as follows:
1. For all monetary accounts (bank accounts, term deposits, credit cards, term loans and mortgages) you need to check the bank statements for each account at 31 March to ensure the closing balances agree to the balances in your accounting system.
We also need to know the detail of any overdraft and loan arrangements such as interest rate, security and repayment terms as these details need to be disclosed in the notes to your annual accounts.
Make sure you provide us with RWT certificates for all interest received and all dividend statements for any dividend income to ensure we are claiming the correct tax credits in your income tax return.
2. For debtors, hopefully you wrote off any bad debts before year end as a deduction for bad debts can only be claimed if they were physically written off the debtors’ ledger on or before 31 March. If not, you can raise a provision for bad debts in the accounts; however the provision will not be deductible for tax purposes.
3. If you have intercompany accounts at year end (amounts owed to or from related parties) these balances need to be confirmed with the related party.
4. If your business has inventory or stock you should have performed a stocktake on or around 31 March. Stock values will have an impact on the taxable profit of your business therefore it is worthwhile looking to see if any stock needs to be scrapped because it is obsolete or damaged.
You have the option with trading stock to value it at the lower of cost, market value, or replacement value. You can make this choice on an item by item basis; you don’t have to use the same method for all of your stock, but you do need the records to prove what you’ve done. Calculations of any work in progress should also be supplied as well as details of any stock in transit or on consignment.
5. The fixed asset register should be reviewed so any assets no longer in use can be written off. We will need details of any fixed asset purchases or sales during the year and also details of any new hire purchase or lease agreements that you have entered into. If there have been repairs and maintenance during the year, we will need to review to ensure they are deductible and don’t need to be capitalised. Don’t forget, assets less than $500 can be deducted up front.
Have any business assets been used privately during the year? And on the flip-side, have any private assets been used in the business, such as a home office? We will need to consider apportionment, fringe benefit tax or reimbursement in relation to these.
6. If you have an overdrawn shareholder current account we will need to review this to determine whether interest must be charged on this.
7. Hopefully you advised us of any shareholding changes during the year (before they occurred) but if you haven’t we will need to consider shareholder continuity and the impact on imputation credits and tax losses.
8. For Accounts Payable (creditors), you will need to agree the ledger to external creditor statements at 31 March. If you have incurred a cost but haven’t yet been invoiced an accrual will need to be raised.
9. Keep a record of the holiday pay provision you pay out between 31 March and 2 June as a deduction can be claimed for these amounts at 31 March.
10. If you are game, have a go at reconciling your GST, FBT, wages & salaries to IRD records at 31 March. Alternatively, provide us with copies of the returns and we can perform this riverting task.
11. Don’t forget all the fun times you’ve had during the year and give us the details of your entertainment expenditure. Some entertainment expenditure is only 50% deductible while others are 100% deductible.
12. If you have travel costs, let us know if any relate to private/holiday travel as FBT will need to be considered.
13. If you were feeling charitable during the year, provide us with your donation receipts so we can ensure you either receive the deduction you are entitled to or a tax credit.
14. If you’ve had a bit of strife during the year, you’d best give us details of your legal expenses so we can determine if they are fully deductible. As a rule, if your total legal fees for the year are less than $10,000 you should receive a deduction.
If you would like assistance with any of your year-end compliance obligations please contact us and one of our business advisory consultants would be happy to assist you, or alternatively you can contact the following Hayes Knight consultants direct:
Shelley-ann BrinkleySenior Tax Manager
T +64 9 414 5444
Sue TregowethSenior – Business Services
T +64 9 414 5444