Insight Accounting Limited Blog

Planning for the New Financial Year

For most businesses, April marks the start of a new financial year.  It's an opportune time to review the past year and plan for the next.

How has the last 12 months gone for your business and are you achieving your goals?

What would you like to see improve over the next 12 months?  It could be sales, cashflow or simply more leisure time.

Accounting and management systems.  Are they delivering the information you need to make informed decisions?

Are there any external influences that present threats or opportunities for you?  There are a lot of proposed changes in government policy that will certainly affect you, no doubt you've heard about them through the media, but how will they impact on your business?

We are here to help and provide insights into your business environment.  For a no-obligation review of your position and how we can add value, call us today.

Preparing for End of Financial Year

If your business has a 31 March balance date, then your end of financial year is approaching fast.

Make sure you are prepared by reviewing the following:

  • Debtors – are they all recoverable?  In order to get a tax deduction for bad debts, they must be written off before balance date.
  • Creditors – Make sure you have all unpaid invoices to hand and recorded into your accounting system.
  • If your business holds stock, carry out a stocktake on 31 March.  Stock is valued at the lower of cost price or net realisable value.  However, if your annual turnover is $1,300,000 or less, and your stock value is reasonably estimated to be less than $10,000 then no stocktake is required.
  • If you have a service business, review your work-in-progress at 31 March to ascertain a value.
  • Fixed Assets.  Review your prior years asset schedule and note any that have been sold or are obsolete.
  • Repairs & Maintenance expenditure is generally 100% tax deductible.  If there is any expenditure of this nature then it may be worthwhile doing before 31 March.
  • Low Value Assets.  Generally, minor assets that cost less than $500 are fully tax deductible in the year they are purchased, so now may be a good time to purchase that printer or office chair you've been holding out for.
  • Staff Leave Reports.  If you employ staff, make sure you have all leave reports from your payroll system.  Also, remember that IRD's new Payday filing system is active from 1 April 2019, so make sure you're prepared for this.

If you need assistance with your end-of-year processes, contact me and I can help.

Ring-Fencing of Residential Rental Losses

On 5 December 2018 draft legislation was introduced by the government to ring-fence tax losses for residential rental properties.

The finer details for this new law are still being thrashed out, but broadly speaking, if you own residential rental property that makes tax losses, then from 1 April 2019 you will no longer be able to offset these against other income sources.  Instead the losses will carry forward and accumulate to be offset against future taxable profits earned from the property.

The impact of this change is mainly a timing difference and investors that are heavily negatively geared will be hit the hardest.  Tax losses from residential rental properties can still be used, they are just deferred until a profit is made.  Also, the law will work on a portfolio basis, meaning that profits from one property can be offset against losses from another, provided they are owned by the same individual(s) or a common structure.

If you own residential rental property and would like to discuss your options around this new law, get in touch

How many business decisions do you make each day? Unless you've sat down and thought about it, probably more than you realise. Of the decisions you make, how reliable is your information?

In a perfect world we would have perfect information for business decision making. For example, take quoting work. With perfect information you would know exactly the number or level of inputs such as labour, materials and time that would be required and exactly how much each would cost. Furthermore you would know the exact margin to add on to provide you with your required return on investment and profit. You would also know exactly how much your customer would be prepared to pay, and what your competitors were quoting as well.

The reality of it is however, we do not live in a perfect world. The dynamic nature of the world we live in means business decisions are never made with perfect information. The result of this can lead to cost-overruns, lost profits and failed businesses.

So how can we tip the scales of perfect information a little more in our favour? Whilst perfect information is impossible to achieve, information that is up to date, relevant and reliable goes a long way. Also, strategies such as investing time and resource into accurate costings, keeping accurate records of prior jobs and options for forward purchasing also help.

At Insight Accounting Limited we can develop strategies to provide you with good information so you can make better informed business decisions.

Talk to us today and see how we can add value to your business.