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

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

For small businesses such as restaurants or retail stores It’s particularly important to monitor stock levels when the time for the end of the fiscal year looms.

If you visit your accountant and are unable to remember the stock levels you had a couple of months ago this can lead to problems.

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

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

3 significant changes for 2021

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

1. Don’t forget that your minimum wage will increase by $1.10 and will increase up from $18.90 to $20 per hour from April 1 2021. This could potentially affect your financial records and superannuation payment.
2. A new personal tax rate will apply on income above $180,000. The new tax rate will be in effect starting on April 1st, 2021. Tachibana says this is likely to impact those who make a living from personal service, in contrast to those who hold an investment and enjoy capital gains.
3. Make sure you are aware that ACC Earners’ levy, which helps cover the costs associated with employee injuries, will be kept at present levels until 2022 to help companies deal the financial burdens of COVID-19. As of January 20, 2021 the levy sits at $1.39 for every $100 (1.39%).

The essential elements to EOFY success

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

1. Finalise your accounts

• Check and approve your invoices, bills and expense claims.
• Review accounts with a late payment and outstanding transactions for an overview of the year’s total.
• Review debtors as at 31 March. You may also consider eliminating any outstanding debts so they are considered an expense at the end of the year.
• You should list clients or suppliers who have been invoiced on or before 31 March or before, but who won’t be due until the end of April. Take these costs into consideration as 2020-21 expenses.

2. Make sure you reconcile and clean up your files

• Bank statements should be consolidated, tax year-end statements, and sales records, along with 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 how much profits your company made annually.

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

• Examine the data collected during EOFY to determine the financial health of your business.
• Contact your payroll provider to provide EOFY data as early as possible to allow it to be analysed.
• Access to Inland Revenue documents, including PAYE tax obligations and KiwiSaver obligations for employees.

4. Manage superannuation

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with rates varying for each employee based on their salary and the length of their tenure.
• File electronically, as mandated when your business is paying $50k or more in ESCT tax and PAYE tax.

*For KiwiSaver companies, they must pay ESCT on mandatory employer contributions of 3% but not on contributions deducted from employee wages.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, along with the cost of improvements or maintenance, to claim any EOFY refunds.
• Take into consideration disposing of stocks that are no longer in use since provisions for obsolete stock or write-downs on stock aren’t usually tax-deductible.
• Consider making payments within 63-days after 31 March, to receive a deduction for employee-related expenses like bonus pay, holiday pay and long-service leaves.
• If your income is significantly more than it was last year, you may want to consider an additional provisional tax payment to align your tax payments with turnover.

6. Maintain personal and financial finances Separately

It is not common to get tax deductions on personal expenses. If it’s just business expenses. However, you may be racking up unnecessary compliance costs in the event that your accountant needs to determine what 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 advisor.
• 1 March 2021 - GST return and tax due by the end of January for companies that file every two months.
• The deadline for filing is 31 March - 2020 income tax return due for tax agents (with an extension valid for the deadline).
• 1. April, 2021 The new fiscal year starts from New Zealand.
• 7 May 2021 - final installment of the tax proviso for the fiscal year 2020 and the final opportunity to make voluntary provisional tax payments.
• 7 May 2021 GST tax return at the end of the year and payment due.

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