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

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

Smaller companies, like restaurants or retail stores It’s crucial to monitor stock levels when the time for the end of the fiscal year is near.

If you visit your accountant and are unable to remember the stock levels you had a couple of months ago, that creates difficulties.

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

This change will be a major impact on small businesses.

Three significant changes are coming in 2021.

These are just a few of the important tax-related reforms that have recently occurred or are in the works for 2021.

1. Don’t forget that your minimum wage is set to increase by $1.10, taking it up from $18.90 to $20 an hour from April 1 2021. This could impact your financial records and superannuation payments.
2. A new 39% personal tax rate is set to apply to incomes of more than $180,000. The new rate will apply from 1 April 2021. Tachibana believes this is likely to be a problem for those who earn income from providing personal services, rather than those who hold an investment and enjoy capital gains.
3. Take note that ACC Earners’ levy, that helps pay for the expenses associated with employee injuries, will remain at the their current levels until 2022, to help businesses deal the financial burdens of COVID-19. As at January 2021, the levy was $1.39 100 cents (1.39%).

The fundamental elements of EOFY the success of EOFY

Here are some information and dates from experts which small-business owners might need to be aware of to ensure their house is up and running for tax time.

1. Finalise your accounts

• Examine and approve your invoices, bills and expense claims.
• Follow up overdue accounts and outstanding transactions for a view of the entire year.
• Examine debtors at the time of 31 March. Consider taking any bad debts off so they are considered an annual deduction at the end of the year.
• Note clients or suppliers who paid you invoices on the 31st of March or before but aren’t due until the end of April. You might want to consider treating these costs as 2020-21 costs.

2. Clean up and reconcile your files

• Incorporate bank statement statements and year-end income tax records, plus sales, expenses, and purchase records.
• Reconcile your bank accounts , and make sure they are in balance with the amounts on your bank statements.
• Make a profit and loss statement in order to work out how much profits your company made annually.

3. Re-read the information you receive from your payroll vendor as well as Inland Revenue

• Assess information collected during EOFY to determine the financial position of your business.
• Contact your payroll provider to submit EOFY data in the earliest time possible so it can be analysed.
• Access to Inland Revenue records, including PAYE tax responsibilities and any KiwiSaver duties for staff.

4. Superannuation management

• Update your employer superannuation contribution tax (ESCT) rates*, with rates different for each employee depending on their earnings and length of their tenure.
• Filing electronically, as required by law, if your company pays $50,000 or more a year in ESCT and PAYE taxes.

*For KiwiSaver, businesses need to pay ESCT on mandatory employers’ contributions of 3 percent, but not on contributions taken from the wages of employees.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases during the year, plus spending on repairs or maintenance to claim any refunds from EOFY.
• 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.
• You should consider making your payments within 63 calendar days following 31 March to get the benefit of a deduction for expenses related to employees such as bonuses, holiday pay, or long-service leaves.
• If your earnings are significantly more than it was last year, you may want to consider an additional tax provisional payment to ensure that your tax payment is aligned with your turnover.

6. Maintain personal and financial finances Separately

There aren’t any tax deductions for personal expenses; you only get deductions for business expenses, you could be racking up unnecessary compliance costs If your accountant must separate what’s tax-deductible and the rest of it.

Important tax dates in 2021

• 9 February 2021 - 2020 income tax due for those who do not have a tax professional.
• 1 March 2021 GST return and tax due at the end of January for businesses filing every two months.
• The deadline for filing is 31 March 2021 – 2020 tax return due for tax professionals (with an extended time).
• 1. April, 2021 the start of the new financial year starts from New Zealand.
• 7 May 2021 Final provisional tax instalment due for 2020’s fiscal year and the final opportunity to make tax provisional voluntary payments.
• 7 May 2021 End-of-year GST return and due payment.

Note: Some dates may vary from the official deadline, for instance if a due date falls on a weekend or public holiday.