Key dates and tips to help small businesses prepare for end of financial year

Utilizing intuitive accounting software and cloud storage services like Google Drive or Dropbox – and tenancy management software like myRent.co.nz and myRent.co.nz – can help businesses save time.

Smaller businesses, such as restaurants or retail stores It’s particularly important to monitor stock levels when the closing date of the financial year draws near.

If you visit your accountant and can’t remember your stock level from a couple of months ago it can cause problems.

A good reminder for smaller business owners is that a temporary increase of the instant asset write-off during COVID-19 – from $500 to $5,000 – is set to be lowered back to $1,000 as of 17 March 2021.

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

3 important changes in 2021

Here are some additional important tax-related tax changes that took place recently or are scheduled for 2021.

1. Remember that the minimum wage will increase by $1.10, taking it to $18.90 to $20 per hour on April 1, 2021. This could potentially affect your financial records as well as superannuation payments.
2. A new personal tax rate will be applied on income above $180,000. The new rate will take effect beginning on April 1, 2021. Tachibana states that this will more likely affect those who earn income through personal services, in contrast to those who hold an investment and enjoy capital gains.
3. It is important to be aware of the ACC Earners’ levy, that helps pay for the expenses that are incurred by injuries to employees, will remain at the level until 2022 in order to assist businesses in coping with the financial pressures of COVID-19. In January 2021, the levy is $1.39 for every $100 (1.39%).

The building blocks for EOFY successful EOFY

Here are some helpful advice and dates from experts that small-business owners may be able to remember when getting their house organized for tax season.

1. Finalise your accounts

• Review and approve your bills, invoices and expense claims.
• Follow up overdue accounts and outstanding transactions to gain an overview of the year in its entirety.
• Examine debtors at the time of 31 March and consider writing off any bad debts to be considered an annual deduction at the end of the year.
• Note clients or suppliers who paid you invoices on the 31st of March or earlier but aren’t paid until after April. Think about treating these expenses as 2020-21 expenses.

2. Make sure you reconcile and clean up your records

• Incorporate bank statement statements and year-end income tax records, sales, expense and purchase records.
• Consolidate your bank accounts and verify that they are in line with the balances from your bank statement.
• Create a profit and loss account to determine how much annual profit your business made.

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

• Check the information collected during EOFY to evaluate the financial position of your business.
• Ask your payroll vendor to submit EOFY data when you can, to allow it to be analysed.
• Access Inland Revenue documents, including PAYE tax responsibilities and any KiwiSaver duties for staff.

4. Manage superannuation

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

*For KiwiSaver businesses, they have to pay ESCT on employee contributions up to 3% but not on contributions taken from employee wages.

5. Maximise your tax refunds

• Log expenses and asset purchases during the year, along with spending on repairs or maintenance in order to claim any EOFY refunds.
• You should consider disposing of old stock, as provisions for obsolete stock or stock write-downs aren’t typically tax-deductible.
• Make sure to make payments within 63 days after 31 March in order to claim a deduction for employee-related expenses like bonuses, holiday pay, or long-service leave.
• If your income is greater than the previous year, think about making an additional tax provisional payment to ensure that your tax payment is aligned with your turnover.

6. Maintain personal and financial finances distinct

You generally don’t get tax deductions for personal expenditure; it’s just business expenses. You could be racking up unnecessary compliance costs if your accountant has to split up what’s tax deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 Income tax for 2020 due for those who do not have a tax agent.
• 1 March 2021 - GST return and tax due by January for those who file their GST returns every two months.
• 21 March Tax year 2020 return due for clients of tax agents (with an effective extension of time).
• 1. April, 2021 the start of the new financial year begins on the island of New Zealand.
• 7 May 2021 - final installment of tax provisional due for the fiscal year 2020 and last chance to make provisional tax payments.
• 7 May 2021 End-of-year GST return and payment due.

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