Before Filing Your Tax Return

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6 things you should know before filing your tax return

Here we list 6 things you should know before filing your tax return that will help you get organised and put measures in place to ensure you are minimising your tax whilst ensuring you comply with the IRD regulations.

1. Rules to keep cash flowing

If money is a bit tight as the financial year draws to a close, here are some important tax measures focused on providing and enabling cashflow:

  • If your cash flow has been significantly impacted by the economic effects of COVID-19, you may be able to apply for relief from use of money interest and penalties, or enter into an instalment arrangement for payments due to IRD. IRD’s ability to remit use of money interest in such circumstances applies to tax payments due up until March 24 2022.
  • Keeping an eye on tax losses, as the Government introduced a same or similar business test that allows tax losses to be carried forward. This may become useful if you’re wanting to raise capital for your business in the future.
  • Consider the Small Business Cash flow (Loan) Scheme being offered by the Government through IRD where certain conditions are met. This provides loans for businesses with 50 or fewer full-time staff of up to $20,000 plus $1,800 per full-time employee (dependent on the number of employees) with the first 2 years being interest-free.

2. Asset threshold lowering

Put aside time to review your asset expenditure. Identify any assets (valued up to $1,000) that you need and buy them before the end of the tax year.

3. Earning over $180,000 a year

Review your business and investment structure with us. The marginal tax rate of 39% applies to all employment income over $180,000 a year.

4. Keeping subsidy records is crucial

While COVID-19 related wage subsidies and resurgence support payments are non-taxable, keep accurate records of any subsidy or payment you received and which staff member it was paid to.

5. R&D loss tax credit

Start-up companies are able to cash-out their tax losses arising from eligible research and development (R&D) expenditure, and avoid carrying the losses through to the next income year. The credit can only be for:

  • Eligible R&D business expenditure
  • Up to 28% of your tax losses from R&D activity
  • Companies that are tax residents in New Zealand
  • Dates on or after 1 April 2015. The rules around R&D expenditure are detailed and eligible R&D expenditure will require approval from IRD

6. Staff reimbursements and allowances

Make sure you have a good record of any monies paid to employees for expenditures.

Remember: For telecommunications devices and plans, staff reimbursements are tax exempt up to $5 per week. If reimbursement is above this amount, the exempt amount is 25% if the device or plan is used partly, 75% if used mainly, or 100% if used exclusively for employment purposes.

Working from home (WFH) payments claimed from 1 October 2021 allow an additional $15 per week, per employee, to be exempt income for other WFH expenditure.

Tax-exempt payments for use of furniture or equipment when WFH can reimburse the depreciation of the item.

Important dates to keep in mind for the end of the financial year

  • March 28 provisional tax instalments due for people and organisations who use the ratio method. (This is when your provisional tax is based on a percentage of your tax income)
  • March 31 income tax return due for clients of tax agents and official end of the financial year

Need professional assistance?

Before filing your tax return, you should consider the above (and more) to ensure you are minimising your tax obligations whilst remaining with the IRD’s regulations. This can get complicated! If you would like professional assistance, get in touch with the team of chartered accountants at DNACA – We’ll be happy to help.

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