How to reduce your tax bill | NZ small business edition

As the end of the financial year approaches here in NZ, it’s the perfect time to get your finances in order. Whether you’re a small business owner or a property investor, taking the right steps now can save you money and prevent any last-minute stress come tax time. By planning ahead and making the right moves before the year ends, you can optimise your tax situation for the year ahead.

1. maximise your deductions

One of the simplest and most effective ways to reduce your tax bill is by ensuring you claim all the deductions available to you. As a business owner, take the time to review your expenses and ensure you're claiming everything you’re entitled to, including business-related travel, office supplies, equipment purchases, and professional fees.

Pro Tip: If you’re a business, consider purchasing any business equipment or assets you’ve been thinking about before the tax year ends. These can be claimed as deductions, lowering your taxable income.

2. contribute to your KiwiSaver

KiwiSaver contributions are one of the best ways to save for retirement while potentially lowering your tax bill. Both employee and employer contributions to your KiwiSaver account are typically deducted from taxable income, reducing the overall amount of tax you pay.

If you're self-employed and looking to top up your KiwiSaver contributions, consider making voluntary contributions before the financial year ends to boost your savings and reduce your tax liability.

Pro Tip: Make sure you’re aware of any government contributions you may be entitled to, as they can add to your savings when you contribute a minimum amount.

3. review your capital gains tax (cgt) position

While New Zealand doesn't have a comprehensive capital gains tax, certain gains like those made on property can still be subject to tax under the "bright-line test." If you've sold property or other assets during the year, it's important to review your position and determine whether any tax is due.

If you've made a profit on an asset that falls under the bright-line test, you may need to account for it in your tax return. Additionally, if you've realised any capital losses on assets, you can use those losses to offset any taxable gains.

Pro Tip: If you're close to the bright-line test period for a property sale, it might be worth holding off on selling until the following financial year to avoid triggering tax obligations.

4. make sure you’re up-to-date with your GST

For GST-registered businesses, the end of the financial year is a great time to review your GST filings and ensure you’re on track. Ensure that all your GST returns are up to date and that you've accounted for any input tax credits or expenses that are GST-inclusive. It's also a good idea to check whether any changes in your business might affect your GST position moving forward.

Pro Tip: If you're in a position to make large purchases before the end of the financial year, make sure you account for the GST component in your filings, as it could reduce your GST payable.

5. review your financial statements and tax returns

Whether you're filing your own taxes or working with an accountant, it’s essential to make sure that all your financial statements and records are accurate. A thorough review of your profit and loss statements, balance sheet, and other relevant financial documents will help ensure you’re in a good position for filing.

If you’re unsure about any part of your tax return, it’s always a good idea to consult with an accountant like us here at Every Cent Accounts to ensure you’re not missing any important deductions or credits.

Pro Tip: Keeping accurate, up-to-date records throughout the year will make this process much easier come year-end, and can help prevent any surprises when tax season arrives.

6. plan ahead for the new financial year

Don’t wait until the last minute! Planning for the new financial year now can help you take advantage of any opportunities to reduce your tax bill. This could include setting up new tax-efficient structures for your business, reviewing your investment portfolio, or making plans to increase your KiwiSaver contributions.

Budgeting and cashflow forecasting

A great way to set yourself up for success in the new financial year is by creating a budget and cash flow forecast. Having a detailed budget helps you manage your expenses, while a cash flow forecast can give you a clearer picture of your income and outgoings over the year. These financial tools allow you to stay proactive, avoid surprises, and ensure that you have the resources to take advantage of growth opportunities or cover unexpected costs.

Pro Tip: Make it a habit to regularly review your cash flow forecast and update your budget as necessary. This will help you stay on track and spot potential cash flow issues early. By forecasting your income and expenses, you'll be better equipped to manage your finances throughout the year and avoid surprises. If you find yourself short on time each month, reach out to your bookkeeper or accountant, they may be able to assist you.

By taking these steps before the end of the financial year, you can make sure you're in the best possible position when it comes to taxes. Whether you're looking to maximise deductions, contribute to your KiwiSaver, or ensure your GST is in order, planning ahead will give you peace of mind and help you save money in the long run.