Key dates and advice to help small businesses prepare for EOFY

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

For small businesses such as restaurants and retailers, it’s especially important to keep track of stock levels as the end of financial year looms.

If you visit your accountant but aren’t able to recall your stock levels from 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 asset write-off in an instant during COVID-19 – from $500 to $5,000 – will be increased back to $1,000 beginning 17 March 2021.

It’s a change that could affect a lot of small-scale companies.

Three important changes to 2021

Below are other significant tax-related changes that have recently occurred or are scheduled for 2021.

1. Remember that the minimum wage will increase by $1.10 increasing it between $18.90 to $20 per hour from April 1 2021. This could impact your financial records and superannuation payment.
2. A new personal tax rate will be imposed to incomes of more than $180,000. The new rate will take effect from April 1, 2021. Tachibana says this is likely to be a problem for those who earn income from personal service, as opposed to those who have the shares and make capital gains.
3. Be aware that the ACC Earners’ levy, that helps pay for the expenses of injuries suffered by employees will be kept at their current levels until 2022, to help businesses deal with the financial pressures of COVID-19. In January 2021, the levy is $1.39 each $100 (1.39 percent).

The building blocks for EOFY successful EOFY

Here are some helpful tips and dates from experts that small-business owners may want to keep in mind to ensure their house is ready for tax time.

1. Finalise your accounts

• Examine and approve your bills, invoices and expense claims.
• Follow up overdue accounts and outstanding transactions for an overview of the year in its entirety.
• Review debtors as at 31 March. You may also consider writing off any bad debts in order to make them an annual deduction at the end of the year.
• You should list clients or suppliers who have invoiced you by 31 March or before, but who won’t be paid until after April. You might want to consider treating these costs as 2020-21 costs.

2. Make sure you reconcile and clean up your records

• Combine bank accounts, year-end income tax records, plus sales, purchase and expense records.
• Reconcile your bank accounts , and make sure they are in balance with the amounts from your bank statement.
• Prepare your profit and loss statement to determine the amount of annual profits your business earned.

3. Review data from your payroll vendor and Inland Revenue

• Review the information you have collected during EOFY to review the financial health of your business.
• Request your payroll provider to submit EOFY data when you can, to allow it to be analysed.
• Access Inland Revenue information, including PAYE tax obligations, as well as KiwiSaver duties for staff.

4. Manage superannuation

• Change your employer’s superannuation tax (ESCT) rates*, with the rates differing for each employee based on their income and length of employment.
• You must file electronically, in accordance with the mandate in the event that your business pays $50k or more in PAYE tax and ESCT.

*For KiwiSaver, businesses need to pay ESCT on compulsory employers’ contributions of 3 percent, but not on contributions that are deducted from the wages of employees.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, plus expenses for improvements or maintenance for claiming any EOFY refunds.
• 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.
• You should consider making your payments within 63 days after 31 March to get an employee-related expense deduction like bonuses, holiday pay, or long-service leaves.
• If your earnings are significantly greater than the previous year, consider making an additional tax provisional payment to ensure that your tax payment is aligned to your income.

6. Make sure that personal and business finances are separated

There aren’t any tax deductions for personal expenses. you only get deductions for business expenses, you could be adding unnecessary compliance costs in the event that your accountant needs to separate what’s tax-deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 2021 – 2020 tax year due for taxpayers who don’t have a tax agent.
• 1 March 2021 GST return due and payment due by January for those who file their GST returns every two months.
• 30 March 2021 - 2020 income tax return due for tax professionals (with a valid extension of time).
• 1. April, 2021 The new fiscal year starts in New Zealand.
• 7 May 2021 Final proviso tax instalment due for the financial year 2020 and last chance to make provisional tax payments.
• 7 May 2021 GST tax return at the end of the year and due payment.

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