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.
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 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.
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.
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.
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.
For those clients using Cashmanager RURAL software, you may be aware that the desktop software has become redundant and will no longer be supported. The Cashmanager RURAL Online software is also going to become redundant at some point in the near future and will be replaced with Cash Manager’s new product called Cash Manager Focus.
Our preferred farming software is a Xero+Figured combination so when your subscription comes up for renewal, before you renew, we would like to have the opportunity to discuss and show you this alternative software combination.
Please give us a call and we can arrange a demonstration of the Xero+Figured software for you.
We are excited to announce we are now a Hubdoc Certified Advance Partner.
Hubdoc is an online product that lets you store and organise all your financial documents in one place quickly and painlessly with a click of your mouse or a snap of your smart phone.
If you are tired of the piles of paperwork scattered across the office or folders of invoices and receipts clogging up your office space, and would like an easy to use simple solution then Hubdoc may be the answer you have been looking for.
When you connect your accounts, your recurring bills and statements will automatically be retrieved by Hubdoc and will be added to your secure account in the cloud.
Hubdoc uses OCR (Optical Character Recognition) technology to analyse your receipts (and other scanned documents) for useable data and automatically files them in your own electronic filing cabinet.
When you upload your receipts we convert that data into digital files you can view, download or print from anywhere, anytime you connect to the internet.
You can grant your accountant access to your account and there will be no more requests for copies of invoices.
If you would like to more know, give us a call or watch this space for more details coming shortly.
Although running your own business has its attractions, being in business can leave you feeling lonely and isolated. About 70% of the 400,000 small businesses in New Zealand are operated by just one person. If you are one of these people, this leaves the financial decisions, planning for the future, and the stress of long hours and day-to-day tasks all falling on you, leading to a feeling of isolation.
Research has shown that when business owners feel isolated, the decisions they make can have a negative effect on finances, relationships, and wellbeing both mental and physical. It is vitally important for you to be able to share burdens, bounce ideas around, have the motivation to move forward and feel connected on a business and personal level. The feeling of isolation will prevent you from being able to do this. Your business’s most important asset is you, or more specifically, your ability to make good decisions and work effectively, so it is essential that you protect this asset and make it as strong as possible. How can you do this?
As social beings, we need regular connection with others and building this into your routine is often the first step in being better in your business. This may be as simple as going to your favourite café for your morning break and making a connection there. Another way to keep connected is by attending networking events. Although you may not normally do this type of thing, these events are a great way to connect with others in a similar situation and will help to remind you of why you are in business.
A formal way to stay connected is to have a business mentor or coach that you meet with on a regular, scheduled basis. The formality of these meetings helps focus you on what is important and gives you goals with set dates to achieve these by. Because this gives you accountability, your motivation is improved and you are able to celebrate your successes with somebody who cares about your business.
It is always important to remember why you went into business in the beginning. I would be surprised if the original motivation was to work long hours, not take holidays, argue with loved ones about money and feel alone and isolated. Reach out to your trusted advisors, your banker, accountant, business associates, local community and loved ones to build the connections and support that you need to stay sane in business.
If you have residential rentals you may be aware there are some new legislation changes coming in the new financial year. These changes limit your ability to offset any residential rental losses against other forms of income (this is called ring-fencing). Therefore, if you have any significant repairs and maintenance plans for your residential rentals, it would be tax advantageous to get in quick and do these repairs before 31 March 2019, if you think they may result in a rental loss. Click here to view the previous newsletter for more information
ESCT needs to be checked by 31.03.19. The ESCT rate threshold amount is the estimate of their total salary or wage, plus the employer contributions you’ll make to them in the current income year. The calculated ESCT rate is used for all employer contributions made in the current tax year. If your employee’s salary or wage goes up or down in the current tax year DO NOT adjust their ESCT rate. Update any change at the start of the next tax year.
Where PAYE was filed in the IRD website has changed. You will now be automatically redirected to the My Business screen. If you are not in Payday filing yet the process will still be the same.
IRD Services will be temporarily unavailable. To make the changes, IRD’s key services will be unavailable between 3pm Thursday 18 April and 8am Friday 26 April 2019. During this time you won’t be able to access myIR, E-File or contact us through our contact centres. Our offices will also be closed. Secure mail messages saved as drafts and any draft returns within myIR can’t be brought across and will be deleted as part of this process. Please therefore check your secure mail messages and submit any draft returns before Thursday 18 April. For more information, visit our service update website. If you are wanting to file your PAYE online for the period ending 31/03/2019 this can be done by 18 April or on 26 April due to the system being closed on the 20th.
If you have any questions about the above topics please call Andrea in the office.
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