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

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

Smaller companies, like restaurants or retail stores, it’s especially important to monitor the stock levels in advance of the time for the end of the fiscal year is near.

If you visit your accountant, and you are unable to recall your stock levels from a couple of months ago and you’re having trouble remembering, it’s a problem.

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

That’s a change that will be a major impact on small-scale companies.

3 important changes in 2021

Here are some other significant tax-related changes which have occurred recently or are on the agenda for 2021.

1. Remember that the minimum wage will increase by $1.10, taking it up from $18.90 to $20 per hour from April 1 2021. It could affect your financial records as well as superannuation payouts.
2. A new personal tax rate will be imposed on earnings of greater than $180,000. The new tax rate is effective starting on April 1st, 2021. Tachibana believes this is more likely to affect those who earn a living from providing personal services, instead of those who own investment accounts and are able to earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, that covers the cost associated with employee injuries, will remain at the present levels until 2022 to help companies deal with the financial strains of COVID-19. At the time of January 2021 the levy was $1.39 each $100 (1.39 percent).

The building blocks for EOFY the success of EOFY

Here are some advice and dates from experts that small business owners might want to keep in mind when getting their house in order for tax time.

1. Finalise your accounts

• Examine and approve your bills, invoices and expense claims.
• Follow up overdue accounts and outstanding transactions for a view of the year in its entirety.
• Review debtors as at 31 March. Consider the possibility of writing off any bad debts so they are considered an annual deduction at the end of the year.
• Include clients or suppliers that have invoiced you on 31 March or before but won’t be reimbursed till after April. Take these costs into consideration as expenses for 2020-21.

2. Clean up and reconcile your records

• Bank statements should be consolidated, income tax year-end records, plus sales, purchase and expense records.
• Reconcile your bank accounts and check they match the balances from your bank statements.
• Create a profit and loss account to determine how much annual profit your business made.

3. Review data from your payroll vendor and Inland Revenue

• Assess information obtained during EOFY to determine the current financial situation of your business.
• Contact your payroll provider to provide EOFY data when you can, so that it can be reviewed.
• Access Inland Revenue information, including PAYE tax obligations and KiwiSaver duties for staff.

4. Manage your superannuation

• Check your employer’s superannuation contributions tax (ESCT) rates*, with rates different for each employee depending on their earnings and length of their tenure.
• Filing electronically, as required when your business is paying more than $50,000 per year in tax on PAYE and ESCT.

*For KiwiSaver, businesses need to pay ESCT on compulsory contribution from employers of up to 3 per cent, but not on contributions that are deducted from the employee’s wages.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases during the year, plus spending on repairs or maintenance in order to claim any refunds from EOFY.
• You should consider disposing of old stock in light of the fact that provisions for old stock or stock write-downs are not typically tax-deductible.
• Consider making payments within 63 days after 31 March to obtain a deduction for employee-related expenses like bonuses, holiday pay, and long-service leaves.
• If your income is higher than last year, consider making an additional voluntary provisional tax payment to make sure your tax payments are aligned with turnover.

6. Make sure that personal and business finances are separated

Tax deductions are not usually available for personal expenses. deductions for personal expenditure; it’s only your company expenses. But you might be adding unnecessary compliance costs when your accountant is required to determine what tax-deductible and the rest of it.

Tax dates for 2021 are important.

• 9 February 2021 Tax on income for 2020 due for those who don’t have a tax advisor.
• 1 March 2021 - GST return and due by the end of January for businesses that file each two months.
• 31 March 2021 2020 income tax return due for tax agents (with an effective extension of time).
• 1 April 2021 The new fiscal year starts with New Zealand.
• 7 May 2021 Final installment of tax provisional due for the financial year 2020 and the final opportunity to make tax provisional voluntary payments.
• 7 May 2021 Tax return for the year’s end and payment due.

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