Important dates and advice to help small businesses get ready for end of financial year

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

For smaller businesses like restaurants and retailers it is crucial to monitor the stock levels in advance of the closing date of the financial year draws near.

If you go to your accountant, and you are unable to recall your stock levels from the last few months and you’re having trouble remembering, it’s a problem.

A useful reminder for small entrepreneurs is that a temporary boost in the write-off of assets in the moment 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 affect a lot of small-scale businesses.

Three significant changes are coming in 2021.

These are just a few of the important tax-related tax changes which have occurred recently or are planned for 2021.

1. Do not forget that the minimum wage will rise by $1.10, taking it up from $18.90 to $20 an hour as of 1 April 2021. This could potentially affect your financial records and superannuation payment.
2. A new 39% personal tax rate will be applied on income above $180,000. The new tax rate is effective from April 1, 2021. Tachibana states that this is likely to affect those who earn income by providing personal services as opposed to those who have an investment and enjoy capital gains.
3. Make sure you are aware that ACC Earners’ levy, that covers the cost of injuries suffered by employees will remain at the their current levels until 2022, to help businesses cope with the financial pressures of COVID-19. As at January 2021, the levy stood at $1.39 100 cents (1.39 percent).

The essential elements to EOFY achievement

Here are some important advice and dates from experts which small-business owners might wish to consider while putting their home up and running for tax time.

1. Finalise your accounts

• Make sure you approve the bills, invoices and expense claims.
• Review accounts with a late payment and outstanding transactions to gain an overview of the entire year.
• Examine debtors at the time of 31 March. Consider taking any bad debts off so that they can be counted as an expense at the end of the year.
• List suppliers or clients who’ve been invoiced on or before 31 March or earlier but aren’t reimbursed till after April. Consider treating these costs as 2020-21 costs.

2. Clean up and reconcile your files

• Consolidate bank statements, income tax year-end documents, as well as sales, purchase and expense records.
• Consolidate your bank accounts and check they match the balances from your bank statement.
• Prepare your profit-and-loss statement to determine how much annual revenue your business has earned.

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

• Check the information that you have collected during EOFY to determine the financial situation of your business.
• Ask your payroll vendor to provide EOFY data when you can, so that it can be reviewed.
• Access to Inland Revenue documents, including PAYE tax obligations, as well as KiwiSaver obligations for employees.

4. Manage superannuation

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the rate different for each employee depending on their salary and the length of employment.
• File electronically, as mandated, if your business pays at least $50,000 in ESCT tax and PAYE tax.

*For KiwiSaver businesses, they need to pay ESCT on mandatory employee contributions up to 3%, but not on contributions taken from the wages of employees.

5. Maximise your tax refunds

• Record all expenses and purchases of assets 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 write-downs of stock are not typically allowed as tax deductions.
• Make sure to make payments within 63 calendar days following 31 March, to receive the benefit of a deduction for expenses related to employees such as bonuses, holiday pay, and long-service leaves.
• If your income is substantially higher than last year, you may want to consider an additional voluntary tax payment to align your tax payments with your earnings.

6. Keep business and personal finances distinct

You generally don’t get tax deductions for personal expenses; it’s just company expenses. But you might be racking up unnecessary compliance costs if your accountant has to divide what is tax-deductible and what’s not.

Some key 2021 tax dates

• 9 Feb 2021 - 2020 income tax due for those who don’t have a tax agent.
• 1 March 2021 GST return and payment due by January for those who file their GST returns every two months.
• 30 March 2021 Tax year 2020 return due for tax agents (with an extended the deadline).
• 1 April 2021 The new fiscal year starts with New Zealand.
• 7 May 2021 Final proviso tax instalment due for the 2020 financial year and the final opportunity to make voluntary tax payments.
• 7 May 2021 GST tax return at the end of the year and due payment.

Note: Some dates may be different from the official deadline, for instance when a due date is a weekend or public holiday.