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

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

For small businesses such as retailers or restaurants, it’s especially important to track stock levels as the end of financial year is near.

If you visit your accountant and can’t remember your stock levels from just a few months ago this can lead to problems.

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

This change will affect a lot of small-scale enterprises.

Three important changes to 2021

These are just a few of the significant tax-related changes that occurred recently or are in the works for 2021.

1. Don’t forget that your minimum wage will rise by $1.10, taking it between $18.90 to $20 an hour as of 1 April 2021. This could potentially affect your financial records as well as superannuation payment.
2. A new personal tax rate will apply to incomes of more than $180,000. The new tax rate is effective from 1 April 2021. Tachibana claims that this is more likely to affect those who earn income by providing personal services rather than those who hold the shares and make capital gains.
3. It is important to be aware of the ACC Earners’ levy, which helps cover the costs related to injuries sustained by employees, will be kept at current levels until 2022 to help businesses cope the financial burdens of COVID-19. In January 2021, the levy was $1.39 for every $100 (1.39%).

The essential elements to EOFY successful EOFY

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

1. Finalise your accounts

• Review and approve your invoices, bills and expense claims.
• Check overdue accounts and outstanding transactions for a view of the year in its entirety.
• Re-evaluate debtors on 31 March and consider writing off any bad debts so they are considered a year-end deduction.
• Include clients or suppliers that have invoiced you by 31 March or earlier, but who won’t be invoiced until April. Consider treating these costs as 2020-21 costs.

2. Clean up and reconcile your records

• Incorporate bank statement statements and year-end income tax records, sales, expense and purchase records.
• Consolidate your bank accounts and make sure they are in balance with the amounts on your bank statements.
• Prepare your profit-and-loss statement to work out how much annual revenue your business has earned.

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

• Examine the data that you have collected during EOFY to determine the financial health of your business.
• Request your payroll provider to supply EOFY information as soon as you can to allow it to be analysed.
• Access to Inland Revenue records, including PAYE tax obligations and KiwiSaver obligation for workers.

4. Superannuation is a key component of the financial system.

• Change your employer’s superannuation tax (ESCT) rates*, with the rates varying for each employee based on their salary and length of employment.
• Filing electronically, as required in the event that your business pays $50,000 or more a year in ESCT tax and PAYE tax.

*For KiwiSaver companies, they must pay ESCT on 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

• Record all expenses and purchases of assets in the course of the year, and spending on repairs or maintenance in order to claim any refunds from EOFY.
• Consider disposing of obsolete stock, as provisions for obsolete stock or stock write-downs are not typically tax-deductible.
• You should consider making your payments within 63 days after 31 March, to receive an employee-related expense deduction such as bonuses, holiday pay, or long-service leaves.
• If your earnings are significantly higher than what you earned last year, you might want to make an additional provisional tax payment to make sure your tax payments are aligned with your earnings.

6. Keep business and personal finances separate

There aren’t any tax deductions on personal expenses. If it’s only your business expenses. You could be incurring unnecessary compliance costs if your accountant has to separate what’s tax-deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 Tax on income for 2020 due for taxpayers who don’t have a tax representative.
• 1 March 2021 - GST return due and payment due by the end of January for those who file their GST returns every two months.
• 31 March 2021 2020 income tax return due for clients of tax agents (with an extended the deadline).
• 1 April 2021 - the new financial year begins in New Zealand.
• 7 May 2021 - final installment of tax provisional due for 2020’s fiscal year and last chance to make provisional tax payments.
• 7 May 2021 Tax return for the year’s end and due payment.

Note: Some dates may differ from the deadline, such as when a due date is a weekend or public holiday.