Important dates and advice to help small businesses prepare for EOFY

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

For small businesses such as retailers or restaurants It’s crucial to monitor stock levels when the end of financial year approaches.

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

A good reminder for small entrepreneurs is that a temporary increase in the instant asset write-off during COVID-19 from $500 to $5,000 – is set to be lowered back to $1,000 as of 17 March 2021.

This is a change that will have a big impact on small-scale businesses.

3 significant changes for 2021

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

1. Remember that the minimum wage will increase by $1.10 and will increase to $18.90 to $20 per hour starting on April 1 2021. This could potentially affect your financial records and superannuation payment.
2. A new personal tax rate will apply to incomes of more than $180,000. The new rate will apply beginning on April 1, 2021. Tachibana believes this will more likely affect those who earn a living by providing personal services as opposed to those who have investments and earn capital gains.
3. Be aware that the ACC Earners’ levy, that covers the cost associated with employee injuries, will be kept at present levels until 2022 to assist businesses in coping the financial burdens of COVID-19. In January 2021, the levy stood at $1.39 100 cents (1.39 percent).

The foundational elements for EOFY achievement

Here are some tips and dates from experts who small business owners might need to be aware of as they get their home in order for tax time.

1. Finalise your accounts

• Examine and approve your invoices, bills and expense claims.
• Check overdue accounts and outstanding transactions to gain an overview of the year’s total.
• Review the debtors’ accounts as of 31 March and consider eliminating any outstanding debts to be considered a year-end deduction.
• List suppliers or clients who’ve invoiced you on 31 March or before but aren’t paid until after April. Consider treating these costs as 2020-21 expenses.

2. Make sure you reconcile and clean up your records

• Consolidate bank statements, year-end income tax documents, as well as sales, expenses, and purchase records.
• Reconcile your bank accounts and verify that they are in line with the balances from your bank statements.
• Prepare your profit-and-loss statement to work out how much annual profit your business made.

3. Review data from your payroll vendor and Inland Revenue

• Check the information that you have collected during EOFY to evaluate the financial situation of your business.
• Ask your payroll vendor to submit EOFY data when you can, so it can be analysed.
• Access to Inland Revenue records, including PAYE tax obligations and KiwiSaver obligation for workers.

4. Superannuation management

• Change your employer’s superannuation tax (ESCT) rates*, with the tax rate different for each employee depending on their salary and the length of tenure.
• Electronically file, as required, if your business pays $50k or more in ESCT tax and PAYE tax.

*For KiwiSaver businesses, they need to pay ESCT on compulsory employers’ contributions of 3 percent, but not on contributions taken from employee wages.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, along with expenses for improvements or maintenance for claiming any EOFY refunds.
• Think about disposing of stock that is no longer needed, as provisions for obsolete stock or stock write-downs aren’t usually tax-deductible.
• Make sure to make payments within 63 days of 31 March in order to claim an allowance for employee-related expenses such as holiday pay, bonuses and long-service leave.
• If your income is higher than last year, you might want to make an additional voluntary tax payment to ensure that your tax payment is aligned to your income.

6. Keep business and personal finances separate

It is not common to get tax deductions for personal expenses. it’s just business expenses. You could be incurring unnecessary compliance costs when your accountant is required to separate what’s tax-deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 - 2020 income tax due for taxpayers who don’t have a tax professional.
• 1 March 2021 GST return 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 agents (with a valid extension of time).
• 1. April, 2021 The new fiscal year begins from New Zealand.
• 7 May 2021 Final installment of the tax proviso for the financial year 2020 and the final opportunity to make voluntary provisional tax payments.
• 7 May 2021 - end-of-year GST return and due payment.

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