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Time to get financial records in order 13 Feb 2012
THE financial year end is approaching. Now is a good time to get your financial records in order, and to prepare plans and budgets for the ensuing year.
 
Preparing for annual accounts
 
Avoid the temptation to implement your own accounting system without first consulting us. Client-created accounting data are often more expensive to process than starting from scratch. This includes proprietary brands. Spreadsheets are mostly a disaster.
 
Please answer all the questions in our questionnaires. They help us to make sure we don’t overlook anything. Sorry, but we have to ask you the same questions every year in case there have been changes. Please repeat your answers rather than refer us to last year’s file as it saves us time.
 
Rental properties
 
For those owning rental properties, there will be no depreciation claim on buildings this financial year. Those who pay annual tax of more than $50,000 may need to top up their 2012 provisional tax to allow for this. If in doubt, discuss the matter with us.
 
IRD has also revised what it considers is a separate depreciable asset. For example, fitted furniture now forms part of the building and, therefore, there is no depreciation.
 
Look-Through Companies
 
Those with Look-Through Companies who are paying the owners a salary, must have an employment contract with the company which:
 
  • specifies the terms and conditions of the services to be performed by the working owner; and
  • specifies the amount payable to the working owner for the performance of the services; and
  • is in writing.
 
Shareholder remuneration
 
If you are new in business and operate through a limited liability company, make sure the working directors have authorised income for themselves for the 2012 year.
 
This means written authority to comply with the Companies Act 1993. If you fail to authorise shareholder salaries in the proper way (see us for details) and your company fails, your drawings are repayable to the company.
 
There could also be an argument with the IRD as to whether your current year’s salary is tax deductible.
 
Putting yourself on a PAYE salary does not get around the need for written authorisation. This is because PAYE relates only to tax law.

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