Important dates and advice to help small businesses prepare for end of financial year

Utilizing intuitive accounting software as well as cloud storage like Google Drive or Dropbox – in addition to tenancy administration software like myRent.co.nz can help save businesses time.

Smaller businesses, such as restaurants or retailers, it’s especially important to track stock levels as the close of the financial year is near.

If you visit your accountant and are unable to remember the levels of your stocks from a couple of months ago it can cause problems.

A useful reminder for small entrepreneurs is that a temporary increase of the instant asset write-off during COVID-19 – from $500 to $5,000 – is being scaled back to $1,000 starting 17 March 2021.

That’s a change that will have a big impact on small-scale businesses.

Three significant changes are coming in 2021.

Here are some other important tax-related tax changes that have recently occurred or are in the works for 2021.

1. Don’t forget that the minimum wage will rise by $1.10 and will increase between $18.90 to $20 per hour from April 1 2021. It could affect your financial records as well as superannuation benefits.
2. A new 39% personal tax rate is set to apply to incomes of more than $180,000. The new tax rate is effective starting on April 1st, 2021. Tachibana says it is more likely to impact those who make a living from personal service, in contrast to those who hold investment accounts and are able to earn capital gains.
3. Make sure you are aware that ACC Earners’ levy, that covers the cost of injuries suffered by employees will remain at the level until 2022 in order to assist businesses in coping with the financial strains of COVID-19. In January 2021, the levy is $1.39 for every $100 (1.39%).

The foundational elements for EOFY achievement

Here are some helpful advice and dates from experts that small business owners might wish to consider to ensure their house is up and running for tax time.

1. Finalise your accounts

• Make sure you approve the bills, invoices and expense claims.
• Review accounts with a late payment and outstanding transactions for a view of the year’s total.
• Review the debtors’ accounts as of 31 March. Consider taking any bad debts off so they are considered a year-end deduction.
• Include clients or suppliers that have invoiced you on 31 March or earlier but won’t be invoiced until April. Take these costs into consideration as 2020-21 costs.

2. Clean up and reconcile your files

• Combine bank accounts, income tax year-end records, sales, purchase and expense records.
• Reconcile your bank accounts , and verify that they are in line with the balances from your bank statements.
• Prepare your profit and loss statement to determine the amount of annual revenue your business has earned.

3. Re-read the information you receive from your payroll company and Inland Revenue

• Review the information you have taken during EOFY to evaluate the financial health of your business.
• Contact your payroll provider to supply EOFY information as early as possible so it can be analysed.
• Access to Inland Revenue records, which include PAYE tax responsibilities and any KiwiSaver obligations for employees.

4. Superannuation management

• Change your employer’s superannuation tax (ESCT) rates*, with rates dependent on their salary and the length of service.
• File electronically, as mandated when your business is paying $50,000 or more a year in PAYE tax and ESCT.

*For KiwiSaver companies, they must pay ESCT on employers’ contributions of 3 percent but not on contributions taken from wage payments to employees.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases in the course of the year, and the cost of improvements or maintenance in order to claim any EOFY refunds.
• Take into consideration disposing of stocks that are no longer in use since provisions for obsolete stock or stock write-downs aren’t typically allowed as tax deductions.
• Consider making payments within 63 days of 31 March, to receive the benefit of a deduction for expenses related to employees like holiday pay, bonuses and long-service leave.
• If your earnings are significantly higher than what you earned last year, you might want to make an additional provisional tax payment to align your tax obligations with your earnings.

6. Separate personal and business finances Separately

It is not common to get tax deductions for personal expenses; it’s just business expenses. You could add unnecessary compliance charges in the event that your accountant needs to divide what is tax-deductible and what’s not.

Important tax dates in 2021

• 9 Feb 2021 Income tax for 2020 due for those who do not have a tax agent.
• 1 March 2021 - GST return due and payment due at the end of January for those who file their GST returns every two months.
• 31 March 2021 Tax year 2020 return due for clients of tax agents (with an effective extension of time).
• 1. April, 2021 - the new financial year starts on the island of New Zealand.
• 7 May 2021 - final proviso tax instalment due for the financial year 2020 and the final opportunity to make provisional tax payments.
• 7 May 2021 Tax return for the year’s end and due payment.

NOTE: Some dates may vary from the official date, for example, the due date is a weekend or public holiday.