Important dates and advice to help small businesses prepare for EOFY

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

For smaller businesses like restaurants or retail stores It’s particularly important to keep track of stock levels as the end of financial year is near.

If you go to your accountant and can’t remember your stock levels from a couple of months ago this can lead to problems.

A good reminder for smaller entrepreneurs is that an increase in the asset write-off in an instant during COVID-19 – from $500 to $5,000 – will be increased back to $1,000 beginning 17 March 2021.

This change will have a big impact on small-scale businesses.

Three significant changes are coming in 2021.

These are just a few of the important tax-related reforms which have occurred recently or are scheduled for 2021.

1. Don’t forget that the minimum wage will rise by $1.10 and will increase from $18.90 to $20 an hour as of 1 April 2021. This could affect your financial records as well as superannuation payouts.
2. A new 39% personal tax rate is set to apply for incomes above $180,000. The new tax rate will be in effect from 1 April 2021. Tachibana states that it is more likely to affect those who earn income from personal service, instead of those who own the shares and make capital gains.
3. Be aware that the ACC Earners’ levy, which helps cover the costs that are incurred by injuries to employees, will remain at its their current levels until 2022, to help companies deal with the financial strains of COVID-19. As at January 2021, the levy was $1.39 100 cents (1.39 percent).

The essential elements to EOFY achievement

Here are some helpful advice and dates from experts which small-business owners might wish to consider as they get their home organized for tax season.

1. Finalise your accounts

• Review and approve your bills, invoices and expense claims.
• Review accounts with a late payment as well as outstanding transactions to get a view of the year’s total.
• Review the debtors’ accounts as of 31 March and consider the possibility of writing off any bad debts to be considered a year-end deduction.
• List suppliers or clients who’ve invoiced you on 31 March or before but will not be invoiced until April. Take these costs into consideration as 2020-21 expenses.

2. Clean up and reconcile your records

• Consolidate bank statements, year-end income tax records, plus sales, expenses, and purchase records.
• Consolidate your bank accounts and ensure that the balances are the same from your bank statements.
• Prepare your profit and loss statement to determine the amount of annual revenue your business has earned.

3. Review data from your payroll provider and Inland Revenue

• Check the information that you have collected during EOFY to assess the current financial health of your business.
• Request your payroll provider to send EOFY details as early as possible so that it can be analyzed.
• Access Inland Revenue records, including PAYE tax obligations and KiwiSaver obligations for employees.

4. Superannuation is a key component of the financial system.

• Update your employer superannuation contribution tax (ESCT) rates*, with the tax rate differing for each employee based on their salary and length of their tenure.
• You must file electronically, in accordance with the mandate, if your business pays at least $50,000 in PAYE tax and ESCT.

*For KiwiSaver businesses, they need to pay ESCT on compulsory contribution from employers of up to 3 per cent, but not on contributions deducted from the wages of employees.

5. Maximise your tax refunds

• Log expenses and asset purchases in the course of the year, and expenditure on improvements or upkeep, to claim any EOFY refunds.
• Consider disposing of obsolete stock because provisions for the disposal of obsolete stock or write-downs on stock aren’t usually tax-deductible.
• You should consider making your payments within 63 days of 31 March to get a deduction for employee-related expenses like holiday pay, bonuses and long-service leaves.
• If your income is significantly more than it was last year, consider making an additional voluntary provisional tax payment to ensure that your tax payment is aligned to your income.

6. Make sure that personal and business finances are separated

Tax deductions are not usually available for personal expenses. deductions for personal expenses; only business expenses. However, you may add unnecessary compliance charges if your accountant has to separate what’s tax-deductible and what’s not.

Some key 2021 tax dates

• 9 February 2021 2021 – 2020 tax year to be paid for those who don’t have a tax professional.
• 1 March 2021 GST return due and payment due by the end of January for businesses that file each two months.
• 21 March Tax year 2020 return due for tax agents (with an effective extension of time).
• 1 April 2021 The new fiscal year begins with New Zealand.
• 7 May 2021 Final installment of the tax proviso for the 2020 financial year and last chance to make voluntary provisional tax payments.
• 7 May 2021 End-of-year GST return and due payment.

Notice: Some dates may differ from the deadline, such as if a due date is a weekend or public holiday.