GRL March 2016 Newsletter
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GRL Special Alert Year End 2016

With the tax year end fast approaching for most taxpayers, there are a number of steps that you can take prior to balance date that can assist in maximizing tax efficiency. The list below identifies some of these steps together with important tax reminders. This list is not intended to be exhaustive or a comprehensive account, please contact us for further detail and/or clarification.

  • Debtors. Review your debtors. Did you take reasonable steps to recover bad debts? If so, make sure your records show this. If you write off bad debts before 31 March, you may be able to claim a deduction. Make sure to give us the details so we can check any GST adjustments are correct.
  • Employee expenses. Amounts owing to emplyees for holiday pay, bonuses, redundancy payments, long service leave etc. can be claimed, if you have committed to them at year end and pay them within 63 days of balance date. Check holiday pay has been calculated correctly.
  • Fixed Assets. Review your fixed assets. Are you still using all of them or can some be written off?
  • Repairs and Maintenance. Undertake planned maintenance or repaires before year end to ensure a tax deduction. Deciding whether expenditure on an asset is classified as repairs and maintenance (which would be deductable) or as a capital expense is not always clear. Contact us if you aren’t sure.
  • Stock. Do a stocktake. Dispose of obsolete stock by year end or write it down to its net realisable value (the lesser of cost or market value). If your stock is worth less than $10,000 and your turnover is less than $1.3m for the year, you won’t need to include your stock movement for tax purposes.
  • Bad Debt. Have you written off all debts that you consider are ‘bad’? Individual trade debts should be reviewed and actually written off in your debtor ledger prior to balance date for them to be allowed as a deduction in the financial year. A debt is considered bad if a reasonable and prudent business person would be of the view it is unlikely that the debt will be paid. Factors to consider are the length of time the debt is outstanding, and the efforts that you have taken to collect the debt and information on the debtor. A debtor does not need to be insolvent for the debt to be bad, so you can still pursue the debtor for payment.
  • Donations. Companies are allowed a deduction for gifts of money to charitable organisations which are approved for donation tax credit purposes. Donations are deductible only to the extent of the company’s taxable income for the year.
  • Employee Wages and Leave. Employee related expenses (holiday pay and bonus provisions). An employer can obtain a deduction for employee related expenses (for example holiday pay, bonuses, long-service leave and gratuities), providing payment is made within 63 days after year-end. Therefore, a deduction is permitted if the payment is made on or before 2 June (for a 31 March balance date).
  • Interest Payments. Have you paid more than $5,000 in interest to someone other than a bank? If you have, you may be required to withhold resident withholding tax.
  • Fixed Assets. Assets no longer used in the business For tax purposes fixed assets can be written off if: the asset is no longer in use by the business; and is not intended to be used in the future; and the cost of disposing the asset would be more than its disposal value. We recommend assets be reviewed for use, to determine whether or not a deduction would be available. Low value assets, with a value of $500 (GST exclusive) or less can be written off immediately. This is providing that: the asset is not an upgrade or part of a wider asset; or The acquisition is not part of a wider acquisition of the same asset from the same supplier, with the same depreciation rate.
  • Purchases and sales. A full month’s depreciation can be claimed for any part month that an asset is owned and used. It may be worth buying replacement assets on or just before balance date to obtain one month’s worth of depreciation deduction. If you expect to make a loss on sale, consider selling prior to balance date. If you expect to make a gain on sale, consider deferring the sale until after balance date. This will accelerate any available deduction or decelerate the requirement to return taxable income. Commercial fit-out. The rate of depreciation on buildings for tax purposes is 0%. To maximise depreciation deductions it is important to separately identify, where possible, commercial fit-out (depreciation deductions can be claimed) from the building proper.
  • Prepaid Expenditure. Certain types of expenditure can be claimed as a tax deduction in the year in which they are incurred regardless of the fact that the good or service will not be used until a future year, but only if they have also been expensed for financial reporting purposes. Some of these prepayment concessions have a dollar limit and/or a limit on the length of the period after year-end. The following prepaid expenses could be claimed in the 2015/2016 income year: Advertising for up to 6 months after the balance date and not exceeding $14,000 in total; Insurance for up to 12 months after the balance date as long as the premiums incurred during the year for the contract do not exceed $12,000; Subscriptions or fees for membership in any trade or professional association, for up to 12 months after the balance date as long as the expenditure incurred during the year for membership in the association does not exceed $6,000; Advance bookings for travel and accommodation, to be used within 6 months after balance date and not exceeding $14,000 in total; Stationery, subscriptions for newspapers, journals or other periodicals, and postal and courier services (unlimited). Vehicle registration fees, drivers license fees and road user charges (unlimited);
  • Repairs and Maintenance. Broadly, repairs and maintenance expenditure is deductible only to the extent it has been incurred. There is also a fine line between a deductible repairs and maintenance expense (deductible) and capital expenditure (non-deductible). You may wish to consider accelerating repairs and maintenance expenditure to claim deductions.
  • Vehicle Expenses. If you have a vehicle which has not been used 100% for business purposes, have you kept a logbook? A logbook test period can be used to establish a business use percentage for tax, GST and FBT purposes. A new test period might be needed if there has been a significant change in business usage. However, sometimes a representative period may not even be possible, and a permanent logbook will need to be kept.

7th April 2016
Terminal Tax

20th April 2016

Minimum Wage

The minimum wage will increase from $14.75 to $15.25 per hour.

Training and new entrants’ minimum wages will increase from $11.80 to $12.20 per hour.

It is with deep regret that we wish to inform our clients of Janice Jones’ death.

Each of us not only grieves at the passing of a tremendous individual but also for the loss her family suffers. Janice was a dedicated employee at Gardiner Reaney for 37 years.

We will miss her dearly.

As of this month, GRL will be sending our statements electronically.

If we currently hold an email address for you, we will be sending an electronic statement to you. If you would prefer a paper copy, or you wish to update your details in order to receive an electronic copy, please contact Chantal at our office on 06 8353385.

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