Year-end tax checklist: Where to start…
1. Write off bad debts
If you have debts that are unlikely to be recovered, make sure you write them off your debtor’s ledger and general ledger before year-end. This must be done before your financial accounts are finalised, as only debts written off in time are deductible for tax purposes.
2. Make charitable donations
Consider making donations to approved charities before the tax year ends. You’ll receive a donation receipt, which can be used to claim a deduction or rebate - whether you’re a company or an individual. Filing for your rebate can be done soon after the tax year closes.
3. Review dividends and imputation credits
If you’re planning to pay dividends, check your company’s imputation credit account. Avoid ending the year with a debit balance, as this can result in a 10% penalty tax. Proper management of imputation credits is key to efficient tax planning.
4. Manage shareholder current accounts
Overdrawn shareholder current accounts can create tax complications. Consider whether you need to charge interest or repay them through salary or other means before year-end.
5. Elections
Review any elections for your business structure, such as joining a consolidated group or becoming a look-through company. Many of these elections are time-sensitive and revolve around the year end.
6. Thin capitalisation for foreign-owned businesses
If your business is foreign-owned, ensure you’re maximising interest deductions and meeting thin capitalisation requirements. This may involve reviewing your balance sheet and asset valuations.
7. Trading stock adjustments
Assess your trading stock for obsolete or unsaleable items. Scrapping obsolete stock before year end can allow you to claim a deduction.
8. Tax losses
Don’t forget to consider utilising tax losses against taxable profits in group companies. A tax loss in a loss company can be utilised against taxable profits in a fellow group company subject to specific rules. The tax loss is transferred by way of a loss offset election, a subvention payment or a combination of both. Talk to your BDO adviser before 31 March to work out which option is best for you and complete the necessary paperwork on time. Timely administration is good for your tax hygiene.
More helpful tips
Staying proactive now can help you maximise deductions, avoid penalties, and start the new financial year on the right foot.
For more information, view our year-end tax reminders checklist online or contact one of BDO’s tax experts.
