What The Tax? #2: Financial Year-End Tax Tips
31st of March is just around the corner – but what does it mean for Kiwis who are in business? Bosspac looks at a few things that self-employed people like you have done before the end of the financial year to help minimise your next tax bill.
Financial or calendar year?
We are used to the calendar year that starts on 1/January and ends on 31/December. It’s a bit different story with the financial year in New Zealand. Most of the Kiwis need to pay attention to the personal and company financial year, which usually starts on 1/April and ends on 31/March in the following year. It also applies to your personal tax returns.
Sooner or later?
Are you planning to buy something for your business? Business expenses made before 1/April will reduce your taxable income for this financial year. But don’t go crazy – just the stuff that you really need and definitely not private expenses! 👍
Happy New (Financial) Year!
Home office expenses?
If you are working from home for your business, make sure you claim a proportion of your expenses in relation to your home office.
It includes power, rent or rates, interest on your mortgage, insurance, phone or more. Make sure you claim the right proportion.
To work our the percentage that relates to the business, people usually take the work area that they use for business and divide it by the total floor area of the house. Then apply this percentage to the total house expenses.
IRD has prepared a quick guide for this.
Planning a bigger purchase?
If you need some new equipment (e.g., laptop) that is worth more than $500 and were planning to postpone the purchase for a few weeks, think again. If you buy it before 1/April, a months worth of depreciation can be claimed this financial year (instead of being claimed after a year).
File and pay on time
Avoid penalties and interest to IRD (it adds up very quickly!) – get everything up-to-date and file on time. You don’t want to spend your well-deserved profit on late penalties and interest.
Remember that 7/July is IR3 return deadline for people who don’t have tax agents with an extension of time.
When to start?
If you haven’t started your business, yet, and are thinking when is the best time to do it, it might pay off to wait a few weeks. If you start your business on 1/April or later, there will be fewer returns and payments to the government to make.
If you have any genuine business expenses coming up soon, you could look at incurring them in March rather than in April. This will help you to lower the tax bill a whole year earlier. If you claim business expenses this financial year, your tax payments for the next year will be higher, but a dollar saved today is better than a dollar saved tomorrow! 👍
And remember to support all your expenses with receipts or invoices!
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The information provided here is of a general nature. It is not intended to be a substitute for professional advice.