Reducing your end-of-year tax bill

The end of the financial year is looming, and now is a great time to gather your records for your accountant and streamline your record-keeping process for the upcoming financial year. It’s important to understand the information that you must keep and provide to your accountant. Providing the correct information will make the account preparation process more efficient, and less costly.

So, what do you need to provide? 

Firstly, it’s essential to understand what service your accountant is providing for you and what information the accountant already has access to.

If you are only getting a tax return done, then you need to provide details regarding any income received apart from PAYE salary, interest, and dividend. The IRD online service will have a record of all payroll information, as well as interest and dividends received by you. Nonetheless, you must check the return to ensure that nothing had been missed. Occasionally, payers don’t file the details with the IRD. If you have an investment portfolio, you need to provide the reports from your provider including the year-end tax report, regardless of what income you have received from your investment. This is to enable the accountant to determine if there is any income to return on your holdings at market value. 

If you are getting final reports (this normally applies to companies, trusts, partnerships and some sole traders), you will need to provide access to your reports from your accounting system (if not on Xero):

• Closing bank statements at 31 March.
• All loan statements from 1 April – 31 March.
• All investment statements.
• Debtors or creditors at year-end.
• A list of bad debts to write off.
• Receipts for all fixed assets purchased in the year.
• Details on stock held.
• All GST workings.
• Holiday pay owing at 31 March and of this amount – how much was paid out between 1 April and 2 June.
• Any repairs & maintenance invoices over $1,000.
• Legal invoices (if total is over $10,000 net of GST) and other information on any other expenses or transactions that you believe would be important or significant when preparing the accounts.

Please note that if you use Xero to prepare your GST, we might need loan statements, but not bank statements, debtors, creditors, or GST workings as we should already have access to this information.

To ensure the accuracy of balance sheet balances during the preparation of accounts, we rely on external documents as an essential resource. We need to verify the value of both assets and liabilities as they determine the equity of a company, which represents its book value. If the equity is negative, the company is deemed insolvent – it cannot pay its debts when they fall due, and no dividends can be paid. Getting this number right is of utmost importance.

To ensure your tax position is correct

Accountants must also verify profit and loss items to ensure the correctness of your tax position. If there are items that have changed since the previous year, then your accountant may need to ask questions to ensure your tax position is correct. Your accountant aims to reduce your tax bill as much as possible.

If you would like help with optimising your record keeping, or if you would like a copy of our end-of-year-checklist, please feel free to contact me.