Tax time can be stressful if you don’t get all your ducks in a row early. We’ve prepared a quick guide with top tips for End of Financial Year 2023 to make it simple and stress-free.
Bonus: Download the full checklist to keep on track
Before you get started… Talk to your accountant. They’ll help you with specific advice, and ensure you’re taking advantage of any relief packages or deduction strategies that may cut down your tax bill. They’ll also help you avoid common tax mistakes.
Upcoming tax deadlines
View the full tax year calendar from the Inland Revenue Department.
Follow up outstanding invoices
Got clients who haven’t paid yet? Now’s the time to chase them up. Send out reminders for any outstanding invoices, double-check you’ve charged all your clients correctly, follow-up any unpaid and/or overdue invoices and make sure none have slipped through the cracks.
Compare records in your JMS and your accounting software
Compare invoice statuses in your job management software are showing correctly in your accounting software as paid or outstanding.
Declare your bad debts: If you’ve tried everything in your power to get a client to settle with no results, it might be time to write them off as bad debt. Writing them off may mean you’re in for a tax deduction, which can be handy to help recoup some of the losses from the client. Prepare as much evidence as you can that your client didn’t pay. Think email correspondence, legal documentation, and more
Compile your expenses
As a tradie, you rack up a ton of business expenses — and now it’s time to round them all up.
To claim on expenses, you need proof of purchase, so gather up your bank statements and vehicle logs, and start searching for any rogue receipts that fall under things you can claim. Look in your emails for receipts from purchases you’ve made for your business (like tools or materials), request any missing invoices from contractors, and dig out those petrol receipts from the glove box. All these little costs add up.
What can I claim?
Vehicles and associated running expenses
Self-education courses or training
Work-related items like your phone or laptop (and phone bill)
Tools, equipment and supplies related to your job
Rent paid on business premises or home office expenses
Meal expenses in some situations
Union or association fees
Conditions exist for most claim categories, for example if you use your tools for personal use as well as for work then you can only claim the work portion for tax purposes. Learn more about claiming expenses here.
It’s also good practice to pay for anything that could be a claimable business expense through your business account, so you’ve got a solid paper (and electronic) trail. Evidence of business expenses must be kept for 7 years.
Conduct a stocktake and make any final purchases
This means counting your stock on hand to make sure everything is in its place and where possible, that no tools or materials are unaccounted for from the past year. Once you’ve done this, it’s time to figure out what stock is still usable, and which stock you’d like to write-off or write-down.
Ideally, try to do this as soon as possible and purchase replacements (and any other last-minute purchases) before 31 March. This way, you can include them as an expense in the 2022/ 2023 financial year.
Gather and organise your financial records
The main reports you’ll need to generate at EOFY are a profit & loss statement (P&L) and a balance sheet. Your P&L shows your total income and expenses for the year, which you’ll need to calculate how much income tax to pay. Meanwhile, your balance sheet should include your assets and liabilities, which are used to calculate your net assets.
If you’re using Fergus, you can access these through your Business Activity report.
Buy and write-off depreciating assets
When you purchase a depreciating asset the cost is spread over the useful life of the asset. Each year the depreciation is deducted from the value of the asset, and you can claim on this amount.
For tax purposes, you must depreciate assets that:
Are owned by you or your business and are available for business use;
Cost more than $1000;
Have an expected life of more than 12 months.
Finalise your payroll
If you’ve got employees and/or apprentices working for you, you’ll want to review their salary and wage information and ensure you are up-to-date with both minimum wages and your legal requirements as an employer.
Tip: Now’s a good time to check that you are meeting your Kiwisaver/Superannuation requirements and contributing the correct amounts.
Other tips to reduce your tax bill
Check the integration between your job management software and your accounting software is firing correctly.
Put time aside at the end of March to pay all your last-minute bills. You can also pre-pay as many bills for the next 12 months as possible before 31 March, as prepayments are tax-deductible in the year you paid for them.
Double and triple-check that your figures are up to scratch. While it is possible to fix some tax mistakes, you’ll end up paying for it one way or another. If you realise you’ve made a mistake or underpaid on tax, contact Inland Revenue straight away to work out the best way to get it sorted.
Get organised and stick to the deadlines. You’ll incur penalty fees for missing deadlines, which can quickly add up.
Claim tools (and anything over $1000) as an asset rather than an expense. This allows you to benefit from the write-offs for depreciating assets, and also helps if you’re planning to apply for financing in the future.
Note: This article is a guide only and does not represent official financial advice. We recommend that you speak with your accountant, bookkeeper or financial adviser before filing your returns.
Stuck sorting your paperwork at the last minute? Save yourself the pain of planning last minute by getting a tool to help you stay on track all year. Get your 14-day free trial of Fergus job management software to see how easy it can be.