6 things you should know before filing your EOY tax

Ticking items off your end-of-year tax checklist this month?

  1. Rules to keep cash flowing – If money is a bit tight as the financial year draws to a close, consider measures providing and enabling cashflow:
    • If your cashflow or ability to make tax payments and file returns has been affected by the recent weather events (including the Auckland January flooding and Cyclone Gabrielle) or is still affected by COVID, you may be able to apply for relief from use of money interest and penalties, or enter into an instalment arrangement for payments due to Inland Revenue.
    • Keep an eye on tax losses, as it may be possible to carry them forward and recognise them as an asset in your accounts. This may become useful if you’re wanting to raise capital for your business in the future.
    • The Small Business Cashflow (Loan) Scheme was extended to 31 December 2023, and businesses that have repaid their loans can re-borrow until that date.
  1. Asset threshold lowering – Put aside time to review your asset expenditure. Identify any assets (valued up to $1,000) that you need, and buy them before the end of the tax year. Ensure records are up to date on any commercial buildings, as depreciation for tax purposes is available on commercial buildings.
  2. Earn over $180,000 a year? – If you or your employees earn over $180,00 a year, review FBT and your business and investment structure with us. The 39% marginal tax rate applies to all employment income over $180,000 a year. It includes extra pay earned in the course of employment, such as bonuses, back pay, redundancy, and retirement payments. It is timely also to review dividend payments.
  3. Keeping subsidy records crucial – Keep accurate records of any subsidy or payment you received and which staff member it was paid to or business expense it was applied to, to ensure correct tax treatment and in case the Ministry of Social Development asks to review your records down the track.
  4. R&D loss tax credit – Start-up companies are able to cash-out their tax losses arising from eligible research and development (R&D) expenditure, and avoid carrying the losses through to the next income year. The credit can only be for:
    • eligible R&D business expenditure
    • up to 28% of your tax losses from R&D activity
    • companies that are tax residents in New Zealand
    • dates on or after 1 April 2015. The rules around R&D expenditure are detailed and eligible R&D expenditure requires approval from Inland Revenue. – Check records of such expenditure are up to date.
  1. Staff reimbursements and allowances – Make sure you have a good record of any reimbursements and allowances paid to employees for expenditures. Remember:
    • For telecommunications devices and plans, staff reimbursements are tax exempt up to $5 per week. If reimbursement is above this amount, the exempt amount is 25% if the device or plan is used partly, 75% if used mainly, or 100% if used exclusively for employment purposes.
    • WFH payments – an additional $15 per week, per employee, can be treated as exempt income for other WFH expenditure
    • Tax-exempt payments for use of furniture or equipment when WFH can reimburse the depreciation of the item. The payment will typically be for the cost of the asset and the payment will still be deductible to the employer. The low-value asset threshold of $1,000 will apply here.

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