Key dates and tips to help small businesses get ready for EOFY

Utilizing intuitive accounting software and cloud storage services like Google Drive or Dropbox – as well as tenancy management software such as myRent.co.nz - could save businesses time.

For small businesses such as restaurants or retailers, it’s especially important to keep track of stock levels as the time for the end of the fiscal year looms.

If you go to your accountant and are unable to remember the stock levels you had just a few months ago and you’re having trouble remembering, it’s a problem.

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

This change will be a major impact on small-scale businesses.

3 significant changes for 2021

Below are other important tax-related reforms that have recently occurred or are in the works for 2021.

1. Don’t forget that your minimum wage will rise by $1.10 increasing it up from $18.90 to $20 an hour as of 1 April 2021. This could affect your financial records as well as superannuation benefits.
2. A new personal tax rate will be applied to incomes of more than $180,000. The new tax rate will be in effect beginning on April 1, 2021. Tachibana claims that this is more likely to impact those who make a living through personal services, instead of those who own investments and earn capital gains.
3. Be aware that the ACC Earners’ levy, that covers the cost related to injuries sustained by employees, will remain at its present levels until 2022 to help businesses deal with the financial strains of COVID-19. At the time of January 2021 the levy is $1.39 per $100 (1.39%).

The building blocks for EOFY success

Here are some important advice and dates from experts that small-business owners may want to keep in mind to ensure their house is ready for tax time.

1. Finalise your accounts

• Examine and approve your bills, invoices and expense claims.
• Review accounts with a late payment and outstanding transactions to gain an overview of the year’s total.
• Review the debtors’ accounts as of 31 March. You may also consider taking any bad debts off to be considered an end-of-year deduction.
• List suppliers or clients who’ve been invoiced on or before 31 March or earlier but will not be paid until after April. You might want to consider treating these costs as 2020-21 expenses.

2. Make sure you reconcile and clean up your files

• Combine bank accounts, year-end income tax and sales records, along with expense, and purchase records.
• Consolidate your bank accounts and make sure they are in balance with the amounts from your bank statement.
• Prepare your profit-and-loss statement to calculate the profits your company made annually.

3. Check the data you received from your payroll company and Inland Revenue

• Check the information obtained during EOFY to evaluate the financial position of your business.
• Request your payroll provider to submit EOFY data in the earliest time possible so it can be analysed.
• Access Inland Revenue records, which include PAYE tax obligations and KiwiSaver obligations for employees.

4. Manage superannuation

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the rate varying for each employee based on their salary and the length of service.
• Electronically file, as required in the event that your business pays more than $50,000 per year in tax on PAYE and ESCT.

*For KiwiSaver businesses, they have to pay ESCT on employer contributions of 3%, but not on contributions that are deducted from employee wages.

5. Maximise your tax refunds

• Log expenses and asset purchases throughout the year, as well as the cost of improvements or maintenance to claim any EOFY refunds.
• Think about disposing of stock that is no longer needed since provisions for obsolete stock or stock write-downs are not generally allowed as tax deductions.
• Consider making payments within 63 days after 31 March, to receive an allowance for employee-related expenses like holiday pay, bonuses and long-service leaves.
• If your income is greater than the previous year, you might want to make an additional voluntary provisional tax payment to ensure that your tax payment is aligned to your income.

6. Keep business and personal finances separate

There aren’t any tax deductions for personal expenditure; you only get deductions for company expenses. But you might be incurring unnecessary compliance costs if your accountant has to determine what tax-deductible and what’s not.

Tax dates for 2021 are important.

• 9 February 2021 - 2020 income tax due for those who don’t have a tax professional.
• 1 March 2021 GST return and due at the end of January for businesses that file each two months.
• 21 March - 2020 income tax return due for clients of tax professionals (with an extension valid for the deadline).
• 1. April, 2021 the start of the new financial year begins from New Zealand.
• 7 May 2021 - final installment of the tax proviso for the financial year 2020 and the final opportunity to make voluntary provisional tax payments.
• 7 May 2021 GST tax return at the end of the year and payment due.

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