Most New Zealand businesses will have a year-end of 31st March. It is possible in some situations to have that balance date changed to 30th June and that may suit some Australian businesses who have New Zealand interests. If you believe that a 30th June balance date would suit your needs better, simply contact us and we can prepare an application on your behalf.
That being said, there are a number of advantages of preparing a New Zealand tax return a little earlier than your Australian entity so you might want to talk to us about that as well.
Whether your end of year is 31 March or 30th June, there is still time to reduce your NZ tax by simply taking a look at how you manage your costs.
To help you we have set out below a number of items that, by paying prior to your year end date, you can reduce your tax bill for the current year. Remember that the New Zealand tax opportunities can be quite different from those available in Australia.
For New Zealand tax purposes, deductible expenses may be claimed in the year in which they are incurred, even though payment may be made in the following year. Here are some special expenses which are either deductible in full or in part when they are incurred, even though they might actually be related to the next income tax year.
The following expenses have no restrictions on the amount deductible:
- Subscriptions to newspapers, journals, and other periodicals;
- Postage and courier costs;
- Road user charges; and
- Audit and accounting fees
Deductible providing that the amount covers advertising less than 6 months in advance and is under $14,000.
To be deductible for New Zealand tax purposes, bad debts must be written off during the income year. A mere provision or reserve is not deductible.
Amount on hand under $58,000.
- Taxpayers have the option of depreciating fixed assets on either a diminishing value or straight-line basis.
- Fixed assets can only be depreciated from the month of purchase, eg plant and machinery purchased on 25 March 2017 is depreciated for one month.
- Items costing up to $500 (net of GST) may be written off in the year of purchase if certain criteria are met.
Disability/Loss Of Profits Insurance
Premiums are deductible in full where the taxpayers are in business on their own account, or are employees.
A deduction for a discount reserve, such as a prompt payment discount reserve, is allowed if debtors are entitled to this discount.
In the first year, a deduction of 2.5% of the debtors’ amount is allowed, and in subsequent years adjustments are made which maintain the discount level at 2.5% of the debtors’ amount. If a higher discount is generally given, this could be used instead of the 2.5%.
Equipment Service Contracts Or Warranties
The full amount is deductible, providing it forms part of the consideration for the assets.
The amount accrued at balance date is deductible providing it is actually paid within 63 days of the year end balance date.
Prepaid Insurance Premiums
Where the total insurance expense under an insurance contract in the year does not exceed $12,000, you can claim the full 12-month prepayment.
Lease Or Bailment Of Livestock
Deductible providing the prepaid amount is less than 6 months in advance and under $26,000.
Deductible for income tax purposes providing the prepayment it is less than 6 months in advance and under $14000.
Rent For Land And Buildings
Deductible providing the prepayment amount is less than 6 months in advance and under $26000.
Repairs And Maintenance
Generally no deductions are allowed for a repairs and maintenance reserve, except for the periodic overhaul of business aircraft and the maintenance obligations of a construction firm under its building contracts.
Royalties accrued to balance date are fully deductible.
Service Or Maintenance Contracts
A prepayment of 3 months’ expenses is tax deductible, provided the total expense on the contract does not exceed $23,000 in the income year.
Subscriptions For Trade Professional Associations
A prepayment of 12 months is deductible provided the total amount for that association in the year does not exceed $6,000.
Telephone And Other Communication Equipment Expenses
You can claim costs providing it is not paid more than 2 months in advance.
Trading Stock Valuation
Don’t forget to do a stocktake! This is essential for New Zealand tax purposes except where outlined below.
The valuation methods differ depending on whether or not you are a “small taxpayer”. Small taxpayers are those who, together with their associates, have an annual turnover of $3m or less.
If the turnover of the New Zealand entity is less than $1.3m and a reasonable estimate of the true value of stock is likely to be less than $10,000, then a physical stockcount at year-end is not required and the opening stock value may be used.
Please contact us to establish the valuation rules that apply to your situation.
Travel And Accommodation Expenses
For tax purposes prepaid costs are deductible providing the amount paid in advance is for travel and accommodation booked with the next 6 months and is under $14000.
Review credit notes in the months following balance date for any credits which are able to be taken back into the previous financial year.
The information in this article is indicative of NZ tax rules and changes and not intended to be complete for all intents or purposes and does not constitute advice. It is recommended that you obtain professional advice, suited to your particular circumstances, from us before acting on anything you read.