Maintaining a great working relationship with your accountant can be a rich source of business confidence. Asking the right questions is one aspect of maximising the value of this relationship.
Below are 10 questions to help you get the most from your accountant this year.
Questions to ask before the tax year ends
1. When do you expect to file my tax returns?
The current tax year ends on 31 March 2023 so it will be sometime after this date that your tax returns are filed. Businesses with an accountant have until 31 March the following year to file, but in practice you will want your accounts completed and tax returns filed well before this.
Prior to the tax year ending it is worth asking your accountant for a rough indication of when they expect to complete your work. From your point of view, the sooner the better as far as knowing how much income tax your business owes.
2. What information do you need from me?
Often around the tax year end your accountant will send you a questionnaire listing all the information they need to prepare the accounts. Usually this will be things like bank statements, vehicle logbooks, home office details and any documentation around large or unusual transactions. Getting hold of this questionnaire as soon as possible will give you plenty of time to complete it.
3. When do you need the information by?
With a due date locked in well in advance, there will be no last minute rush or delays in providing the information. From the accountant’s point of view, receiving this information on time will speed the accounting process and may even result in lower accounting fees.
Questions to ask once your accounts have been prepared
4. What is my Income Tax bill, and will I need to pay Provisional Tax?
There are two questions here, but the first probably goes without saying, as it is usually the main question you will be interested in.
Provisional Tax is a system of progress payments towards the following year’s likely tax bill. It can be confusing and for business owners it often feels like a double-hit of tax. If you are subject to Provisional Tax, understanding when these payments are due will assist cashflow planning and help avoid any missed payments and penalties from the IRD.
5. How is depreciation being applied to my business assets?
Business owners who understand how depreciation flows through to profit (and tax) are better placed to make decisions around asset purchases. For example, the decision of whether to buy or lease a business asset is closely tied to depreciation. It is useful to ask your accountant to talk you through your business’s Asset Schedule including depreciation rates and methods used for different assets.
6. How has my home office been treated?
If you use a home office, your accountant will probably have asked you a series of questions around how much of your house it takes up and your household expenses. A closer discussion with your accountant about this will help ensure you are claiming the maximum legitimate amount as a home office expense. Many trade business owners also use their home’s garaging or storage space for their business, which should also be factored into the deduction calculation.
7. How has the use of my personal vehicle been treated?
If you use your personal vehicle to do any business-related running around, you will be able to claim a deduction. Talk with your accountant about how this has been calculated and what documentation you need to support it.
8. Are there any year-end GST adjustments required?
When preparing the annual accounts, your accountant will complete a GST reconciliation. This will show up any GST filing errors which occurred during the year. As a result, an adjustment may be required to bring the GST filings back into line. Talking though any GST filing errors will help avoid them in the future, as well a make you aware of any adjustments coming up which will impact cashflow.
9. What is the balance of my Shareholder Current Account?
If your business has a company structure, chances are you have a Shareholder’s Current Account. This is a tricky concept to get to grips with. It can be thought of as a bank account that the shareholder has with the company, keeping a running balance of the amount the company owes the shareholder, or the amount the shareholder owes the company.
Ideally your Current Account will be in ‘credit’, which means there is a net loan from the shareholder to the company. Problems occur when the Current Account becomes overdrawn, meaning the shareholder has taken more money out of the company than was put into it. This is treated as a loan from the company to the shareholder, which becomes problematic. If this is the case, a thorough conversation with your accountant about the implications is required.
10. Are there any other tax deductions I can apply?
From time to time the government comes up with some limited time offers. For example, in 2020 around the time of Covid there were short term changes to the asset values that could be written-off (it rose from $500 to $5000 before dropping back to $1000). It is worth asking your accountant if they are aware of any special deductions or rule changes that could help you save tax.
Going along to your accounting meeting with these questions is likely to result in you gaining a lot of valuable information. There is a good chance you will find the meeting more interesting and you’ll be well best placed to maximise your tax savings.