As we mentioned yesterday, this is a really busy time of year for SMEs and we hope the below list of helpful tips will ensure you are all prepared when it comes to lodging your financials at the end of March.
Trading stock should be valued at year end
Generally trading stock will be valued at cost price. Market value may be used if it is lower than cost. This takes into account obsolescence, slow moving stock etc. Substantiated evidence must be maintained when market value is used, such as sales records before and after balance date. “Small” taxpayers may qualify to use low-turnover valuation methods which involve less compliance.
SHAREHOLDER CURRENT ACCOUNTS
Is your shareholder current account overdrawn?
A deemed dividend or FBT issues may arise if a shareholder's current account has been overdrawn. This often occurs when a shareholder has taken drawings throughout the year in excess of their current account balance. There are options that can be taken to mitigate this situation, such as paying a shareholder’s salary and so it is important to discuss these options with your advisor.
Tax Losses Carried Forward
Tax losses from previous years may be able to be carried forward and offset against income this year. Shareholding continuity rules will apply for companies that have losses from previous years. Subject to grouping and continuity rules, companies may also be able to use losses from other companies within a group. It is important to consider whether or not the ultimate shareholding has changed which could forfeit a loss. Your tax advisor should be notified prior to any changes in shareholding so actions can be taken to preserve or manage the use of losses if possible.
IMPUTATION CREDIT ACCOUNTS FOR COMPANIES
Will your imputation credit account (ICA) be in debit at 31 March?
Before year-end, it is important to consider whether a company’s ICA account will be in debit on 31 March 2015 to ensure that a penalty will not arise. Generally this might occur if dividends are paid out to shareholders attaching more imputation credits than a company has available. Any action to mitigate this situation must be taken before 31 March. If imputed dividends are being paid on or before 31 March 2015, the impact on the ICA will need to be considered to ensure that imputation credits are available and that a debit balance will not arise as a result. It should also be noted that for imputation credits to be carried forward to the next financial year, a 66% shareholder continuity test must be met.
If you want to discuss any of the above items and the relevance to your business we would be happy to chat.