Key dates and tips to help small businesses prepare for EOFY

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

For small businesses such as retailers or restaurants, it’s especially important to track stock levels as the time for the end of the fiscal year approaches.

If you go to your accountant but aren’t able to recall your stock level from a couple of months ago it can cause problems.

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

That’s a change that will have a significant impact on small-scale enterprises.

3 significant changes for 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 is set to increase by $1.10 to increase it between $18.90 to $20 per hour from April 1 2021. It could affect your financial records as well as superannuation payment.
2. A new 39% personal tax rate will be applied for incomes above $180,000. The new tax rate is effective beginning on April 1, 2021. Tachibana says this will more likely be a problem for those who earn income through personal services, in contrast to those who hold an investment and enjoy capital gains.
3. Be aware that the ACC Earners’ levy, that covers the cost associated with employee injuries, will be kept at level until 2022 in order to help companies deal with the financial burdens of COVID-19. As at January 2021, the levy stood at $1.39 each $100 (1.39%).

The essential elements to EOFY successful EOFY

Here are some important advice and dates from experts who small business owners might wish to consider to ensure their house is organized for tax season.

1. Finalise your accounts

• Make sure you approve the invoices, bills and expense claims.
• Monitor accounts that are due and outstanding transactions to get an overview of the year’s total.
• Re-evaluate debtors on 31 March. Consider the possibility of writing off any bad debts to be considered a year-end deduction.
• Note clients or suppliers who invoiced you by 31 March or before but aren’t due until the end of April. Consider treating these costs as 2020-21 expenses.

2. Clean up and reconcile your files

• Incorporate bank statement statements and income tax year-end records, plus sales, expenses, and purchase records.
• Consolidate your bank accounts and verify that they are in line with the balances on your bank statements.
• Create a profit and loss account to work out how much annual profit your business made.

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

• Assess information taken during EOFY to determine the financial condition of your company.
• Request your payroll provider to provide EOFY data when you can, so that it can be reviewed.
• Access to Inland Revenue records, including PAYE tax obligations, as well as KiwiSaver obligation for workers.

4. Manage your superannuation

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the tax rate different for each employee depending on their income and length of employment.
• Filing electronically, as required by law, if your company pays $50,000 or more a year in ESCT tax and PAYE tax.

*For KiwiSaver businesses, they need to pay ESCT for compulsory employers’ contributions of 3 percent but not on contributions taken out of wage payments to employees.

5. Maximise your tax refunds

• Log expenses and asset purchases throughout the year, as well as expenditure on improvements or upkeep in order to claim any EOFY refunds.
• You should consider disposing of old stock, as provisions for obsolete stock or write-downs on stock aren’t generally allowed as tax deductions.
• You should consider making your payments within 63 calendar days following 31 March in order to claim a deduction for employee-related expenses such as bonuses, holiday pay, or long-service leave.
• If your earnings are significantly more than it was last year, think about making an additional provisional tax payment to align your tax payments with your turnover.

6. Make sure that personal and business finances are Separately

Tax deductions are not usually available for personal expenses. deductions for personal expenses; it’s only your business expenses, you could be adding unnecessary compliance costs If your accountant must separate what’s tax-deductible and the rest of it.

Tax dates for 2021 are important.

• 9 Feb 2021 Tax on income for 2020 due for those who do not have a tax advisor.
• 1 March 2021 GST return and payment due by the end of January for businesses filing every two months.
• 31 March 2021 Tax year 2020 return due for clients of tax professionals (with an extended time).
• 1 April 2021 the start of the new financial year begins with New Zealand.
• 7 May 2021 Final installment of the tax proviso for the fiscal year 2020 and the final opportunity to make provisional tax payments.
• 7 May 2021 Tax return for the year’s end and payment due.

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