Key dates and tips to help small businesses get ready for end of financial year

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

Smaller companies, like restaurants and retailers, it’s especially important to monitor stock levels when the end of financial year draws near.

If you visit your accountant but aren’t able to recall your stock levels from the last few months it can cause problems.

A good reminder for small business owners is that an increase in the write-off of assets in the moment during COVID-19 – from $500 up to $5,000 – is set to be lowered back to $1,000 as of 17 March 2021.

This is a change that will be a major impact on small businesses.

Three significant changes are coming in 2021.

Below are other important tax-related changes that took place recently or are scheduled for 2021.

1. Remember that the minimum wage will increase by $1.10, taking it up from $18.90 to $20 an hour as of 1 April 2021. This could impact your financial records as well as superannuation payouts.
2. A new personal tax rate will be applied for incomes above $180,000. The new rate will apply starting on April 1st, 2021. Tachibana claims that it is more likely to affect those who earn a living from providing personal services, rather than those who hold investments and earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, that helps pay for the expenses of injuries suffered by employees will be kept at current levels until 2022 to assist businesses in coping with the financial strains of COVID-19. As at January 2021, the levy stood at $1.39 for every $100 (1.39 percent).

The building blocks for EOFY successful EOFY

Here are some helpful tips and dates from experts that small business owners might be able to remember to ensure their house is in order for tax time.

1. Finalise your accounts

• Review and approve your invoices, bills and expense claims.
• Monitor accounts that are due and outstanding transactions for an overview of the year in its entirety.
• Examine debtors at the time of 31 March. You may also consider eliminating any outstanding debts in order to make them an end-of-year deduction.
• Include clients or suppliers that have invoiced you by 31 March or before but aren’t invoiced until April. Take these costs into consideration as expenses for 2020-21.

2. Make sure you reconcile and clean up your records

• Incorporate bank statement statements and income tax year-end records, plus sales, expense, and purchase records.
• Consolidate your bank accounts and verify that they are in line with the balances on your bank statements.
• Make a profit and loss statement in order to calculate the annual profit your business made.

3. Examine the information from your payroll provider and Inland Revenue

• Review the information you have obtained during EOFY to assess the financial condition of your company.
• Request your payroll provider to supply EOFY information in the earliest time possible so it can be analysed.
• Access to Inland Revenue records, including PAYE tax obligations, as well as KiwiSaver requirements for the employees.

4. Superannuation is a key component of the financial system.

• Update your employer superannuation contribution tax (ESCT) rates*, with rates differing for each employee based on their salary and the length of employment.
• Filing electronically, as required when your business is paying $50k or more in ESCT and PAYE taxes.

*For KiwiSaver companies, they must pay ESCT on compulsory employee contributions up to 3%, but not on contributions that are deducted from the wages of employees.

5. Maximise your tax refunds

• Record all expenses and purchases of assets throughout the year, as well as the cost of improvements or maintenance, to claim any refunds from EOFY.
• Take into consideration disposing of stocks that are no longer in use, as provisions for obsolete stock or stock write-downs aren’t generally allowed as tax deductions.
• Make sure to make payments within 63 days after 31 March in order to claim an allowance for employee-related expenses like bonuses, holiday pay, and long-service leaves.
• If your income is substantially greater than the previous year, consider making an additional voluntary provisional tax payment to align your tax obligations to your income.

6. Maintain personal and financial finances distinct

It is not common to get tax deductions for personal expenditure; it’s just business expenses, you could be adding unnecessary compliance costs when your accountant is required to split up what’s tax deductible and what’s not.

Some key 2021 tax dates

• 9 Feb 2021 2021 – 2020 tax year due for those who do not have a tax professional.
• 1 March 2021 GST return and tax due for the end of January for companies that file every two months.
• 21 March Tax year 2020 return due for tax professionals (with an extension valid for time).
• 1 April 2021 The new financial year starts on the island of New Zealand.
• 7 May 2021 - final provisional tax instalment due for the fiscal year 2020 and the final opportunity to make voluntary provisional tax payments.
• 7 May 2021 End-of-year GST return and payment due.

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