As we are fast approaching the end of the 2023 tax year, there are some key developments that need to be actioned before 31 March (for those with a standard balance date) along with some standard year-end tax issues to consider and some recent developments that you should also bear in mind as you work through your year end.
Bad debts
Do you have receivables that are not likely to be paid? Make sure these bad debts are properly written off in your accounts before year-end so that they can be deductible.
Imputation credit account
Your imputation credit account must have a credit balance at 31 March. This applies to all taxpayers, regardless of balance date. A debit balance will result in a penalty so it is wise to pay careful attention to this especially if you have paid out imputed dividends, received tax refunds or have a loss of shareholder continuity.
Depreciation
Check your fixed asset register: are you using the correct depreciation rates? Remember to depreciate new assets from the beginning of the month of acquisition, not just from the date of purchase. On the other hand, if you have pooled assets, these can be depreciated for the full year of purchase. If you are writing off assets, make sure they have been disposed of by year-end.
Low value assets
Remember that assets that cost less than $1,000 can be immediately deducted, rather than depreciated, as long as you didn’t buy more than one of the item on the same day from the same supplier.
Trading stock
Have you considered reviewing your trading stock valuation? A stocktake should be done at balance date, and any trading stock that is obsolete may be able to be re-valued. You must be able to substantiate valuations that are below cost.
Losses – forfeited if continuity breach
If you are expecting to carry forward tax losses and your company has had a change in shareholding during the year, you may want to check whether the shareholder continuity and business continuity rules have been breached. A breach of both can result in all of your tax losses being forfeited.
Fourth quarter FBT returns
31 March also marks the end of the FBT year, regardless of your financial balance date. The March quarter (or annual) FBT returns are due to be filed by 31 May 2023.
This presents an opportunity to use the various alternate rate options to reduce the FBT payable from the standard 63.93% rate.
GST mixed use taxable and non-taxable supplies
If you are GST registered and have assets that are used to make both GST taxable and GST exempt supplies, you may need to make an annual change of use adjustment in the GST return period that includes your balance date.
GST invoicing changes from 1 April 2023
Gone are the days of GST tax invoices (kind of). I remind you that from 1 April 2023, the current requirements for tax invoices are being relaxed.
It will no longer be necessary to hold a valid tax invoice to claim an input tax deduction and details of what you need to provide your customers in relation to sales are changing.
You don’t need to change your existing practices, but you may find that you get different looking documents from your suppliers for purchases you make.
UOMI rate increase
IR use of money interest rates have shot up recently, currently sitting at 9.21% for underpayments of tax. If we see further rises in the OCR, we can expect that the IR rate may also increase further.
This high interest rate makes it much more attractive to make use of tax pooling to minimise your overall interest cost. If you have provisional or terminal tax payments to make, and do not already use tax pooling, I urge you to look into this.
The tax pooling process not only minimises your interest cost, it can also provide the flexibility to make your tax payments at times that suit your own cashflow patterns.
Navigating all of the tax rules and obligations can be a nuisance for people who understandably just want to focus on running their business. If you have questions or would like help managing your end of year tax affairs, please seek advice from your tax accountant or adviser.
