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

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

Smaller companies, like retailers or restaurants It’s crucial to keep track of stock levels as the closing date of the financial year looms.

If you visit your accountant but aren’t able to recall 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 an increase in the instant asset write-off during COVID-19 from $500 to $5,000 – is being scaled back to $1,000 starting 17 March 2021.

That’s a change that will be a major impact on small businesses.

3 important changes in 2021

Here are some additional important tax-related reforms which have occurred recently or are planned for 2021.

1. Remember that the minimum wage will increase by $1.10, taking it between $18.90 to $20 an hour from April 1 2021. This could impact your financial records as well as superannuation payouts.
2. A new personal tax rate will be applied on earnings of greater than $180,000. The new rate will apply beginning on April 1, 2021. Tachibana believes it is more likely to be a problem for those who earn income by providing personal services instead of those who own investment accounts and are able to earn capital gains.
3. Take note that ACC Earners’ levy, which helps cover the costs of injuries suffered by employees will be kept at present levels until 2022 to help businesses cope with the financial strains of COVID-19. At the time of January 2021 the levy was $1.39 for every $100 (1.39 percent).

The building blocks for EOFY success

Here are some helpful tips and dates from experts that small-business owners may wish to consider while putting their home ready for tax time.

1. Finalise your accounts

• Check and approve your bills, invoices and expense claims.
• Monitor accounts that are due as well as outstanding transactions to get an overview of the year’s total.
• Review the debtors’ accounts as of 31 March, and think about writing off any bad debts in order to make them an annual deduction at the end of the year.
• List suppliers or clients who’ve invoiced you on 31 March or before but aren’t reimbursed till after April. Think about treating these expenses as expenses for 2020-21.

2. Clean up and reconcile your records

• Combine bank accounts, tax year-end statements, and sales records, along with expenses, and purchase records.
• Reconcile your bank accounts , and verify that they are in line with the balances from your bank statement.
• Prepare your profit and loss statement to calculate the profits your company made annually.

3. Examine the information from your payroll vendor as well as Inland Revenue

• Check the information obtained during EOFY to evaluate the financial health of your business.
• Request your payroll provider to provide EOFY data in the earliest time possible so that it can be analyzed.
• Access to Inland Revenue documents, including PAYE tax obligations, as well as KiwiSaver obligation for workers.

4. Superannuation management

• Change your employer’s superannuation tax (ESCT) rates*, with the rate different for each employee depending on their salary and length of employment.
• Filing electronically, as required by law, if your company pays more than $50,000 per year in ESCT tax and PAYE tax.

*For KiwiSaver businesses, they have to pay ESCT for compulsory employers’ contributions of 3 percent, but not on contributions that are deducted from employee wages.

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.
• Take into consideration disposing of stocks that are no longer in use in light of the fact that provisions for old stock or stock write-downs aren’t generally allowed as tax deductions.
• Make sure to make payments within 63-days after 31 March to obtain an allowance for employee-related expenses like bonus pay, holiday pay and long-service leaves.
• If your income is significantly greater than the previous year, consider making an additional tax provisional payment to make sure your tax payments are aligned to your income.

6. Separate personal and business finances separate

It is not common to get tax deductions for personal expenses; only business expenses. However, you may be incurring unnecessary compliance costs in the event that your accountant needs to determine what tax-deductible and the rest of it.

Tax dates for 2021 are important.

• 9 February 2021 - 2020 income tax due for those who don’t have a tax advisor.
• 1 March 2021 GST return due and payment due by the end of January for companies that file every two months.
• 30 March 2021 2021 – 2020 tax return due for tax professionals (with an extension valid for the deadline).
• 1. April, 2021 - the new financial year begins on the island of New Zealand.
• 7 May 2021 - final proviso tax instalment due for the financial year 2020 and last chance to make voluntary tax payments.
• 7 May 2021 End-of-year GST return and payment due.

Notice: Some dates may vary from the official date, for example, if a due date occurs on a weekend, or a public holiday.