Key dates and tips to help small businesses prepare for EOFY

Using intuitive accounting software and cloud storage options like Google Drive or Dropbox – and tenancy management software such as myRent.co.nz can help save businesses time.

For smaller businesses like restaurants or retailers It’s particularly important to track stock levels as the close of the financial year looms.

If you visit your accountant and can’t remember your stock level from just a few months ago and you’re having trouble remembering, it’s a problem.

A useful reminder for small business owners is that a temporary increase in the instant asset write-off during COVID-19 from $500 to $5,000 – will be increased back to $1,000 beginning 17 March 2021.

This is a change that will be a major impact on small businesses.

3 important changes in 2021

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

1. Remember that the minimum wage will rise by $1.10, taking it from $18.90 to $20 per hour as of 1 April 2021. This could impact your financial records as well as superannuation payment.
2. A new personal tax rate is set to apply on income above $180,000. The new rate will apply from 1 April 2021. Tachibana believes it is more likely to be a problem for those who earn income through personal services, as opposed to those who have investment accounts and are able to earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, which funds the costs of injuries suffered by employees will remain at the level until 2022 in order to help businesses deal the financial burdens of COVID-19. In January 2021, the levy was $1.39 per $100 (1.39 percent).

The fundamental elements of EOFY the success of EOFY

Here are some key guidelines and dates from professionals that small business owners might need to be aware of to ensure their house is organized for tax season.

1. Finalise your accounts

• Make sure you approve the invoices, bills and expense claims.
• Review accounts with a late payment as well as outstanding transactions to get an overview of the year’s total.
• Review debtors as at 31 March. You may also consider writing off any bad debts to be considered a year-end deduction.
• Include clients or suppliers that have invoiced you by 31 March or before but won’t be reimbursed till after April. Take these costs into consideration as expenses for 2020-21.

2. Make sure you reconcile and clean up your files

• Consolidate bank statements, tax year-end statements, and sales records, along with expense and purchase 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 calculate the profits your company made annually.

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

• Review the information you have obtained during EOFY to evaluate the financial position of your business.
• Request your payroll provider to send EOFY details as soon as you can to allow it to be analysed.
• Access Inland Revenue records, including PAYE tax obligations, as well as KiwiSaver obligation for workers.

4. Manage superannuation

• Update your employer superannuation contribution tax (ESCT) rates*, with the rate varying for each employee based on their income and length of their tenure.
• File electronically, as mandated when your business is paying more than $50,000 per year in PAYE tax and ESCT.

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

5. Maximise your tax refunds

• Log expenses and asset purchases throughout the year, as well as expenses for improvements or maintenance to claim any refunds from EOFY.
• Think about disposing of stock that is no longer needed 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 calendar days following 31 March to obtain an allowance for employee-related expenses such as bonuses, holiday pay, and long-service leaves.
• If your income is substantially more than it was last year, you may want to consider an additional provisional tax payment to align your tax obligations with your turnover.

6. Maintain personal and financial finances separate

It is not common to get tax deductions for personal expenses. it’s just business expenses. However, you may be racking up unnecessary compliance costs in the event that your accountant needs to divide what is tax-deductible and the rest of it.

Some key 2021 tax dates

• 9 Feb 2021 Income tax for 2020 due for those who do not have a tax advisor.
• 1 March 2021 GST return and due for the end of January for businesses filing every two months.
• 30 March 2021 2021 – 2020 tax return due for tax agents (with an extension valid for time).
• 1. April, 2021 The new financial year begins in New Zealand.
• 7 May 2021 - final proviso tax instalment due for the fiscal year 2020 and the final opportunity to make tax provisional voluntary payments.
• 7 May 2021 Tax return for the year’s end and due payment.

NOTE: Some dates may differ from the deadline, for instance the due date occurs on a weekend, or a public holiday.