Income Tax Returns For Small Businesses: Planning For The Year Ahead

7th of July is around the corner and business owners, property investors, contractors etc that do not have a tax agent will be busy preparing their income tax returns as the financial year just finished. It always pays to spend a little extra time examining your financial position for the year finished and to think about tax minimisation strategies and goals for the 2025 financial year. 

At ANCA Accounting Services, we invest our time in educating our clients and are sincerely passionate about this.

Professional Advice For Filing Your Tax Returns

Here are our top tips to help with ensuring that your income tax returns are filed correctly! As with everything else, specific criteria need to be met.

Business owners:

• Accrue expenses: Account for expenditure that has been incurred before 31 March, even though payment will be made in the new financial year.
• Bad debts: Businesses that have outstanding invoices for which they are unlikely to receive payment in full should consider writing off these amounts as bad debts. Bad debts can be used as a tax deduction, effectively reducing your taxable income for the year. For a debt to be considered bad, you must have formally written it off in your accounts and be able to prove to Inland Revenue that you have taken reasonable steps to recover the amount.

Just because you have written off the debt, it doesn’t stop you from pursuing the debtor or referring them to a debt collection agency. You will only pay tax when the debt is collected.

• Donations: You can claim up to 33% of a donation made to an approved charity in NZ, provided your taxable income is equal to or higher than the donated amount. Don’t forget to file your Donation Tax Credit return once your income tax return is completed.
• Fixed Assets: Review your fixed asset register and assess whether any assets are no longer used by the business, damaged, not working or have been disposed of during the year. By writing off these assets, you can account for the loss on disposal of the relevant assets.
• Home office expenses: If you work from home, claim a portion of your household expenses as a business expense based on the percentage of your home used solely for business. Home office expenses that can be proportionately claimed are interest on mortgage or rent, rates, insurances and utilities.
• Low values assets: If you are GST registered, assets purchased for under $1,000 (GST exclusive) are fully claimable as an expense. If you are not GST registered, assets purchased for under $1,000 (GST inclusive) are full deductible as an expense.
• Record keeping: If you use Xero for your business, ensure that copies of invoices are attached to the relevant transactions. Xero is a great tool and can be used for keeping important documents so make the most of the software and save those loan documents, insurance policies etc in Xero.
• Use of money interest: If you unfortunately incur use of money interest imposed by Inland Revenue, you can claim it as an expense in your return. However, penalties imposed aren’t tax deductible and therefore can’t be claimed as an expense.

Rental property owners 

• Cash back for loans: If you refinanced the mortgage on your rental property or had new lending in the year and therefore received a cash back from the bank, include this as income in your return.
• Chattels valuations: If this is your first year owning a rental property, valuing the chattels and therefore claiming depreciation each year can legally minimise your income tax.
• Interest on home loans for rental property: Depending on when your property was acquired, you might be able to claim only 50% of the total interest for the year as an expense.  

What cannot be claimed as a business expense?

• Capital improvements on a rental property

• Clothes other than uniforms or protective clothing e.g. suits for work even though you may only use if for work

• Fines and penalties

• Income tax

• GST

• Loan principal repayments

What next? 

Once returns are finalised, we encourage clients to think about the next 12 months for their business. Here are a few pointers to get you started that our clients will be familiar with: 

• What are the 3 key goals you as a business owner will commit to achieving. Remember, having SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals helps you stay focused and committed.
• Review these goals every quarter i.e. can you tick off any of the goals? If yes, celebrate this! Do any goals need to be tweaked? The key is holding yourself accountable to achieving these goals, no different to if you were an employee and your performance was measured against KPI’s. 
• Is there anything stopping your business from being successful? If yes, what will you do to change this?
• If one of your goals is to scale your business 
  • Have you told existing clients that you are looking for more work?
  • When was the last time you asked a client for a Google review to help with building trust in your brand?
• Based on your returns/financials just completed, what expenses can you reduce to help with the cash flow of the business? 

Maximise Your Business Potential With ANCA Accounting Services

For personalised assistance, please don’t hesitate to call our ANCA team on 021 031 6200. Or, you can use our contact page to reach us through our website. We can discuss your specific goals, the circumstances of your business and more to discover the best options for you. 

ANCA Accounting Services: Let us help you pave the path to success.