If someone suggested you pay a few hundred dollars a year more than you have to, to your power company, on the understanding that you will get a refund at the end of the year, you would probably think they were mad.
But a lot of people still operate this way with their tax bills.
They pay more than they have to throughout the year - in some cases, significantly more - and wait for the end of the tax year to get the difference back.
We are at that time of year now - have you discovered you are one of them?
Paying more than you need to is easy to do. Provisional tax is calculated on the basis of last year's earnings, plus 5 per cent, so if you do not do anything, the amount you have to pay keeps going up.
If you just keep paying what you are told to, you will end up with bigger tax bills, irrespective of whether your income increases to warrant it.
But in this era of technology and automation, there is no excuse for relying on these sorts of one-size-fits-all estimates, especially if they mean you are going to pay more than you have to and are left with less money in your pocket as a result.
You should be able to use your bookkeeping software to get a clear idea of what your business income really is, how that compares to the previous year's, and what your tax bill will be for the year.
You could also check in more regularly with your accountant, who should be able to tell you how you are tracking.
This is a time when having good systems in place can really pay off.
Reducing your tax bills to more accurately reflect your income should improve your cashflow.
You can use the money to pay off expensive debt or to offset interest if you have an overdraft facility for your business or personal finances.
- Jeremy Tauri is an associate at Plus Chartered Accountants
By Jeremy Tauri
Phone: (09) 438 3322
Fax: 438 8455
134 Bank Street, Whangarei
If we had to sum up Brent and the team at Plus CA it would be - humorous, efficient, professional with a real focus on making your money work to its best ability for you...we will continue to deal with them even though we are moving overseas as we know they have our best interests at heart.
Jeremy thank you for your patience, assistance and general chit chat over the years. I would have absolutely no issue in recommending your services to everyone and anyone – in fact, I do.
We recently employed Jeremy Tauri of Plus Chartered Accountants and have been thrilled with the improved service we have received. Jeremy is really approachable and always available to answer queries. At his instigation we have set up quarterly meetings so that we are regularly reviewing our business and avoiding any ‘end of year surprises’.