When should you contact your accountant about changes in your business?

When should you contact your accountant about changes in your business?

Estimated Reading Time: 4 min

Changes to your business can have tax, compliance and financial consequences, even when the change itself seems relatively minor. Getting advice before you act is far more efficient and cost-effective than fixing a problem afterwards.

Below are some common situations where it is worth considering the potential tax consequences before proceeding.

Your income is changing

Profit is shifting significantly
If your profit for the year is likely to be much higher or lower than expected, your provisional tax payments may no longer be right. Reviewing them early avoids a large unexpected bill, or cash tied up unnecessarily.

Turnover is heading towards $60,000
If you expect to pass $60,000 in the next 12 months, you may need to register for GST. Talk to us as you approach the threshold, not after you’ve crossed it, so you can plan pricing and invoicing.

You’re hiring your first (or next) employee

Employing staff brings PAYE, KiwiSaver, holiday pay and employment agreements. Setting these up properly from day one is far easier than correcting payroll mistakes later.

You’re buying or selling property

Check the tax position before you sign an agreement.

• Residential rental property: a sale may trigger the bright-line test, creating a tax liability on the net sale proceeds.
• Developers, dealers, builders and subdividers: if you’re associated with one, or have subdivided land or done a boundary adjustment, the sale may be taxable unless an exemption applies. These rules are complex.
• GST on the agreement: the GST schedule in a sale and purchase agreement is often completed incorrectly, which can create an unintended GST liability on sale. Have us review the agreement before you sign.

For example: A landlord agrees to sell a rental property they bought 18 months ago for $850,000. They sign the sale and purchase agreement at $1,000,000 before speaking to anyone. Because the property is sold within the bright-line period, the $150,000 gain is taxable. At a 39% tax rate, that’s a bill of around $58,500, due on the net sale proceeds and not budgeted for.

A quick review before signing would have flagged the bright-line exposure and allowed time to set money aside for the tax. Afterwards, the options are far narrower.

You’re changing who owns your company

Changes in shareholding can cost you imputation credits if shareholder continuity rules are breached, and can affect your ability to carry forward tax losses unless the business continuity test is met. Check the effect before shares change hands.

Learn more about our Business & Ownership Structures advisory services here.

You’re buying or selling a business

Whether you’re the buyer or the seller, advice before signing helps you spot risks and opportunities in GST treatment, depreciation adjustments and how the purchase price is allocated. For buyers, the structure matters too: a share purchase and an asset purchase have very different tax outcomes.

Learn more about our buying or selling a business advisory services here.

Inland Revenue has been in touch

If you receive a review or audit enquiry from Inland Revenue, don’t respond on your own. Involving your accountant early generally leads to better outcomes and less stress.

Your personal circumstances are changing

Marriage, separation, retirement, an inheritance, moving overseas or setting up a trust can all affect your tax position. Raising them early opens up planning options that disappear once the event has happened.

Talk to our experts

If a decision involves money, people, property or ownership, call before you commit. Planning ahead keeps your options open and helps you avoid unexpected tax and compliance problems. Considering a change in your business? Talk to your Nexia advisor before you make it.

Learn more about our Tax Consulting and Business Advisory services here.