AUTUMN / MARCH 2016
TOPICS IN OUR NEWSLETTER THIS QUARTER
Year End Questionnaire
One to two months before we plan to start work on your accounts and tax returns we will be emailing the questionnaire link to you along with a list of any other specific information required.
Generally the information required does not change from year to year, so you can start compiling your information as it comes in, so you have it all ready to send in once you receive our email.
The questionnaire is currently available on our website should you wish to download before we contact you.
Other Things to Remember
1. If you need to keep a log book to determine the private share of motor vehicle running costs, it has to be for a three-month representative period. Check to see when you last did a log. Inland Revenue requires you to complete a new one every three years, or more often if the percentage of private running changes by more than 20%. When did you last do your log book?
2. Write off bad debts from the books BEFORE balance date, your write off must be in some written form. Include a date as proof you wrote the amount off in time.
3. Check to see all staff have completed an IR 330. This is needed only once.
4. If you have a company car, the company needs to pay fringe benefit tax (FBT) for your private use or we make an adjustment for this. You can reduce FBT for every complete day it cannot be available for private use, such as while you’re overseas or if the car is being repaired. FBT is usually calculated based on 20% of cost price. Once you’ve had a car for more than five years, you can switch to 36% of “tax book value”. It pays to make the switch for all cars costing more than $15,000.
Stock Take
If the total value of stock is greater than $10,000 you need to count your stock at balance date. This can be a big job for retailers and often has to be done a few days either side of the date. Make sure you have systems to cope with stock arriving and stock sold between the time of counting and the actual balance date.
Watch out for payments made in advance. If the stock hasn’t arrived, the amount paid in advance may not be an expense. You may need to adjust for this. It will depend on the terms.
If it is an expense, include it in stock. Some businesses, such as builders, also have partly completed work. Value this at the direct costs of materials, labour and any other processing costs. Don’t include your profit.
Money Owing to you (Debtors or accounts receivable)
Watch out for work you have done before balance date but been paid for after balance date. If you get paid once a month, your April payment (March balance date) is probably for work done in March. This money forms part of your income for 31 March 2016.
Donations
You can claim for most charitable donations you’ve made by completing the IR 526 form. If these donations are made through a limited company, they are tax deductible, provided the company doesn’t make a loss.
Entertainment
You’ll need to identify entertainment expenses separately as they’re generally only 50% deductible. Gifts of food and wine made to customers or suppliers are not entertainment and, so long as they’re made in the normal course of your business, they are fully tax deductible and don’t need separately identifying.
ACC
Employers get two bills a year, one for staff and one for themselves. It pays to check the bills as mistakes occur. If you have a high income and some is PAYE income, you could find you’re paying premiums on total earnings above the maximum income threshold of $118,191 = Maximum Levy payable is $1,713.76
Bank Accounts
We need evidence of all bank balances at balance date. Banks often wait until statements are full before sending them out. This is no good to us. Insist your bank sends you a statement at the end of each financial year for ALL accounts. This includes mortgages and loans. Bank printouts taken off the internet might not be a good substitute. Sometimes they have to be read from the bottom upwards. Some banks show only the bank balance at the date of printing and not at 31 March.
Tax Administration Fee Invoices
The annual standard fee invoices are being emailed out the last week of March 2016. The invoice fee narrative, as we hope, clearly outlines the basis of the fee. If you have any queries, please contact Rebekah at reception and she will direct you to the correct person.
When your Home is in a Trust
It’s common to allow a family to live in their home owned by a family trust, on the basis the family pays all expenses.
If this agreement isn’t documented, the payments made by the family could be treated as either rent paid for the use of the house, gifts to the trust or loans to the trust. Remove the uncertainty by making sure there is proper documentation. One way of doing this is to get the trustees to record an appropriate minute in a meeting. There is often a mortgage over the house. The capital repayments on the mortgage are the responsibility of the owner, the trust. If you make those payments then, again, you’re either making a donation to the trust or it owes you the money. Solution documentation. If you choose to make it an increase in the trust’s debt to you then you need an ongoing record to show the accumulated liability of the trust. In a nutshell, you need some accounting done.
While this might not need to occur every year, it should be done regularly.
Paid Parental Leave
From 1 April 2016, paid parental leave is increasing in length. Eligible mothers will be able to receive up to 18 weeks of payments instead of 16 weeks if their baby is due or born on or after that date.
My due date is just before April, what if my baby comes late and is born after 1 April?
If your baby is due to be born before 1 April 2016 but arrives late, then you’re eligible for the extra two weeks of payments as it’s the birth date that matters.
What if my baby comes early and is born before 1 April 2016?
If your baby is due on or after 1 April 2016 but decides to make an early appearance, you’re still eligible for up to 18 weeks of payments as it is the estimated due date that counts.
“When everything feels like an uphill struggle, just think of the view from the top.”
Disclaimer – While all care has been taken, Johnston Associates Chartered Accountants Ltd and its staff accept no liability for the content of this newsletter; always see your professional advisor before taking any action that you are unsure about.