Year end Check List for 2012

For many entities and individuals in New Zealand the 31^st of March is the end of the financial year and even more importantly the start of a new year is the following day.

However whilst it is important to not drive looking in the rear vision mirror there are a number of matters that need to be attended to to ensure that all your obligations are meet.

• Trading stock

Stock takes are only required if your stock is more than $10,000 and your turnover is more than $1.3m.

•  Fixed asset review

Review the fixed asset schedule from last year and identify any assets that are missing or have been broken or disposed of.

•  Bad debts

Bad debts must be written off before 31 March to be claimed.  Make sure you have evidence of what you have done up to the point where the debt was written off.  Accounting entries must also be made before 31 March.

• Portfolio investments

For investments in companies outside New Zealand, you will need to list and value them as at 31 March 2012. This forms the basis of the portfolio tax calculation under the foreign investment fund (FIF)regime.   Also note that 2012 is the last year that GPG has an exemption from the FIF regime.

• Imputation credit account

Irrespective of a company’s balance date, you need to ensure that your imputation credit account (ICA) balance is not in debit at 31 March. If an ICA is in debit at 31 March  additional income tax equal to the debit balance, must be paid to the IRD together with a 10% penalty.

• Loss offsets and subvention payments

Loss offsets and subvention payments relating to last year’s tax must be dealt with by 31 March of the year following the year the deduction was claimed (regardless of your balance date).

• Look Through Companies

A company that is currently a standard company can elect to become an LTC for the 2013 income year provided that it files an election prior to its 2012 balance date. A Qualifying company has 6 months following its balance date to make an election for the 2013 income year.

• Dividends

For a dividend to be paid by the end of the income year you need to pass appropriate resolutions prior to year end. RWT, if applicable, will be due 20th of the month following.

• Trust distributions

For distributions to be classed as beneficiary income they must be made during the income year or within 12 months of balance date if the trust deed allows it. Appropriate trustee resolutions must be completed within this timeframe for the distribution to be effective.

• Extension of time arrangements

31 March 2012 is the last day for 2011 tax returns to be filed under extension of time arrangements (“EOTs”). If your 2011 return is not filed in time you risk losing your EOT & may incur a late filing penalty which could be between $50 and $500.

• GST

An adjustment in your GST return for GST for 3/23rds of the previous year’s non-deductible entertainment expenditure must be made in the GST return period in which your income tax return is due or filed. 

31 March will also be the end of the first adjustment period for mixed use assets. You will be required to compare your actual use of the assets against your intended use and make any adjustment required in your GST return aligning to 31 March.

• Pre-payments

Certain pre-paid expenses can be claimed even though they relate to the following year.

• Holiday pay and bonuses

Employee benefits, like holiday pay and bonuses, owing at 31 March can be claimed if paid by 2 June. Bonuses must be incurred before 31 March to be claimable.

• Provisional tax

You must elect to be a provisional taxpayer to receive use of money interest on any overpayment made for the 2012 year. This election must be made when first furnishing your 2011 tax return.

• Due date reminders

If you have a March balance date any terminal tax for 2011 is due 7 April 2012, unless your EOT has been lost. For employers, all wages/salaries paid or credited to staff on or before 31 March 2012 must be included in the ir-File for March 2011 or for the 2012 financial year.

• Fringe benefit tax

31 May is the due date for filing and paying FBT for the 4^th quarter of the year and furnishing annual FBT returns. An election to use the multi-rate FBT rates is made when filing the FBT return. FBT savings can be gained by doing a multirate calculation.

• Tax payments

Review your profit and ensure sufficient provisional tax has been paid. An extra payment can be made to reduce use of money interest accumulating at 8.89%.

• Revenue account property (e.g. subdivided land)

 Losses on revenue account property are only deductible if losses are realised on or before balance date.

This information is of a general nature only and should not be used as a substitute for detailed professional advice.  Specific check lists are available based on further discussions.