Important dates and tips to help small businesses prepare for end of financial year

Using intuitive accounting software and cloud storage options like Google Drive or Dropbox – in addition to tenancy administration software like myRent.co.nz can help save businesses time.

Smaller companies, like restaurants and retailers It’s crucial to monitor the stock levels in advance of the time for the end of the fiscal year is near.

If you go to your accountant and can’t remember your stock levels from a couple of months ago, that creates difficulties.

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

This change will have a significant impact on small businesses.

3 significant changes for 2021

These are just a few of the important tax-related tax changes that took place recently or are in the works for 2021.

1. Don’t forget that the minimum wage will rise by $1.10 increasing it from $18.90 to $20 per hour as of 1 April 2021. This could potentially affect your financial records and superannuation payouts.
2. A new 39% personal tax rate will apply for incomes above $180,000. The new tax rate is effective from 1 April 2021. Tachibana states that it is more likely to be a problem for those who earn income from providing personal services, rather than those who hold investment accounts and are able to earn capital gains.
3. Make sure you are aware that ACC Earners’ levy, that helps pay for the expenses of injuries suffered by employees will remain at its level until 2022 in order to help companies deal the financial burdens of COVID-19. As at January 2021, the levy was $1.39 100 cents (1.39%).

The building blocks for EOFY the success of EOFY

Here are some advice and dates from experts who small business owners might be able to remember when getting their house organized for tax season.

1. Finalise your accounts

• Make sure you approve the invoices, bills and expense claims.
• Follow up overdue accounts as well as outstanding transactions to get an overview of the year in its entirety.
• Examine debtors at the time of 31 March. You may also consider eliminating any outstanding debts so that they can be counted as an end-of-year deduction.
• Note clients or suppliers who invoiced you on 31 March or before but aren’t invoiced until April. You might want to consider treating these costs as 2020-21 costs.

2. Clean up and reconcile your records

• Combine bank accounts, tax year-end statements, 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.
• Create a profit and loss account to calculate the annual profit your business made.

3. Examine the information from your payroll vendor as well as Inland Revenue

• Check the information that you have collected during EOFY to determine the financial position of your business.
• Contact your payroll provider to provide EOFY data when you can, so that it can be analyzed.
• Access to Inland Revenue documents, including PAYE tax obligations as well as any KiwiSaver obligations for employees.

4. Manage your superannuation

• Update your employer superannuation contribution tax (ESCT) rates*, with the tax rate different for each employee depending on their earnings and length of their tenure.
• Electronically file, as required when your business is paying more than $50,000 per year in ESCT and PAYE taxes.

*For KiwiSaver companies, they must pay ESCT on employee contributions up to 3% but not on contributions deducted from the employee’s wages.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases throughout the year, as well as spending on repairs or maintenance in order to claim any EOFY refunds.
• Think about disposing of stock that is no longer needed since provisions for obsolete stock or write-downs of stock are not usually tax-deductible.
• Consider making payments within 63 calendar days following 31 March to get an allowance for employee-related expenses like holiday pay, bonuses and long-service leaves.
• If your income is higher than what you earned last year, you may want to consider an additional voluntary provisional tax payment to make sure your tax payments are aligned to your income.

6. Keep business and personal finances separated

There aren’t any tax deductions for personal expenses; only business expenses. However, you may be racking up unnecessary compliance costs if your accountant has to separate what’s tax-deductible and the rest of it.

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 - 2020 income tax due for taxpayers who don’t have a tax representative.
• 1 March 2021 GST return and tax due for the end of January for businesses that file each two months.
• 31 March 2021 Tax year 2020 return due for tax professionals (with an extended the deadline).
• 1. April, 2021 the start of the new financial year begins in New Zealand.
• 7 May 2021 - final installment of tax provisional due for the fiscal year 2020 and the final opportunity to make voluntary tax payments.
• 7 May 2021 GST tax return at the end of the year and payment due.

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