Archive for March 24, 2021

Collating EOY records

March 24, 2021

As your balance date approaches you will soon receive our blue forms asking you for information.  Depending on your business type this will include debtors, creditors, work in progress, stock and cash on hand.

 

The reason we send these out now rather than later in the year, when we are preparing your annual accounts, is that it can be difficult to remember these details months after the end of the financial year.

 

Below are some helpful hints for gathering your records for the 2021 financial year

  • Put together a file of invoices for assets purchased during the year
  • More frequently suppliers are sending documents electronically, you can forward these emails to your accountant as you receive them who will store them for year end.
  • It is harder for us to access bank information direct from banks on your behalf, please supply closing bank statements, loan statements and interest certificates. If you didn’t receive a paper copy these can be obtained from internet banking.

Farm Sale and Purchase

March 24, 2021

The sale or purchase of a farm is always a significant transaction.

 

The scale and complexity of farming operations today creates multiple issues, from GST to asset value allocations.  Experience shows that sale and purchase agreements are often signed before seeking the right advice.

 

From the 1st July 2021 there are new rules that apply to the allocation of the total price across land, buildings, development expenditure and supplementary feed.  Under the new rules both the vendor and purchaser need to treat the allocation of values the same.

 

The vendor has two months to set the price and advise the purchaser and Inland Revenue.  If this notification is not made, then the buyer has two months to set these prices and advise the vendor and Inland Revenue.

 

The best approach is to have these values specified before signing the agreement as the allocation of values can have implications for Income Tax.

 

Make sure you speak to your accountant and other advisors before entering into any agreement to sell or purchase a property.  There is generally only one opportunity to structure these transactions that benefits all parties.

Xero Multi-Factor Authentication

March 24, 2021

Xero is making Multi-Factor Authentication mandatory for all Xero users. This is to add an extra layer of security, to help avoid hackers and protect your data.

Most of you that log into Xero, should have seen this come up when you login, and for now you have been able to opt to “sort it later”. This is becoming mandatory as of 1 June 2021, so you will no longer have the option to skip this.

If you have a smart phone (Apple or Android), this is nice and simple to set up using the Xero Authenticator App. If you do not have a smart phone, this is still mandatory, and you will have to authenticate using an authenticator software on your computer.

It is simple to set up by following along the prompts from Xero. Xero will also ask you to provide a back up email, in case you ever get locked out, but as not everyone has two email addresses, you have the option to choose three security questions.

If you get stuck, please call the office and we can point you in the right direction.

https://central.xero.com/s/article/Manage-multi-factor-authentication#iOS

Writing off bad debts / stock before balance date

March 24, 2021

There are certain accounting entries that need to be made before the end of the financial year in order to be counted for 2021.

 

Bad Debts

Where customers have not paid you and you are not able to recover these outstanding accounts receivable these balances need to be written off as a bad debt in your accounting software prior to year-end.

 

Stock on Hand

A count of your stock on hand needs to be completed on (or close to) your balance date.  If obsolete stock is identified during the process this also needs to be written off in your accounting software before the end of the financial year.

If stock is recorded manually, make a note of those items that are obsolete, and need written off.

Opportunities and myths around spending before the end of your financial year

March 24, 2021

With the end of your financial year fast approaching, we need to consider if incurring costs now will be beneficial to your income tax position.

There are some real opportunities and at the same time some myths around spending before the end of the month.

 

What you need to consider?

 Stockpile Consumables on farm but no more than $58,000 on hand

Consumables are fencing materials, drenches, fertiliser, fuel, supplementary “bought in” feed, water supply materials, chemicals, etc.

If you have a total of $58,000 (excluding GST) of consumables on hand or less before your balance date you can claim all of them as an expense and decrease your profit for the tax year.

You are required to have these consumables on farm rather than booked up at the store.

Make sure you don’t have in total more than $58,000 worth of various items otherwise this doesn’t apply, and you have to carry the total value of the consumables forward to the next season.

So, if you don’t have many consumables on hand and you will need these items in the coming months, buy some and have them on hand by balance date.

 

Assets under $1,000

As part of the tax changes made in response to Covid-19, assets purchased from 17 March 2020 to 16 March 2021 with a value of less than $5,000 (GST exclusive) were fully deductible in the year of purchase.

As it is now after 16 March 2021, we are now able to claim assets up to $1,000 GST exclusive when they are purchased for income tax.

These would have usually been depreciated over a few years but now you can claim them all upfront in the year you bought them.

Examples could be: phones, laptops, trailers, calfaterias, implements, motorbikes, tools etc

 

A Common Myth

Don’t buy large capital assets before balance date just for income tax reasons.

A common myth is that if you buy big items such as a tractor just before balance date it will help reduce your tax.

Depreciation is calculated monthly so in reality you will get one month’s worth of depreciation which won’t help much at all. If you trade your old tractor in on the purchase of the new tractor there could be income arising from depreciation recovered so it could actually increase your profit rather than decreasing it.

In summary don’t buy big assets just to reduce tax just before balance date, it doesn’t really make a difference.

If you have any questions please do not hesitate to contact the office.