Key dates and tips to help small businesses get ready for EOFY

The use of intuitive accounting software and cloud storage such as Google Drive or Dropbox – in addition to tenancy administration software such as myRent.co.nz can help save businesses time.

For smaller businesses like restaurants and retailers, it’s especially important to keep track of stock levels as the closing date of the financial year is near.

If you visit your accountant and can’t remember the stock levels you had the last few months, that creates difficulties.

A great reminder for small entrepreneurs is that a temporary increase in the instant asset write-off during COVID-19 – from $500 to $5,000 – is being scaled back to $1,000 beginning 17 March 2021.

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

Three significant changes are coming in 2021.

Here are some additional important tax-related tax changes that took place recently or are in the works for 2021.

1. Don’t forget that the minimum wage is set to increase by $1.10 and will increase up from $18.90 to $20 per hour on April 1, 2021. This could impact your financial records and superannuation payments.
2. A new personal tax rate will be imposed on income above $180,000. The new tax rate will be in effect starting on April 1st, 2021. Tachibana claims that this is likely to be a problem for those who earn income from providing personal services, instead of those who own an investment and enjoy capital gains.
3. Be aware that the ACC Earners’ levy, that helps pay for the expenses related to injuries sustained by employees, will remain at the present levels until 2022 to help businesses cope with the financial burdens of COVID-19. At the time of January 2021 the levy sits at $1.39 for every $100 (1.39 percent).

The building blocks for EOFY the success of EOFY

Here are some important advice and dates from experts that small-business owners may wish to consider when getting their house in order for tax time.

1. Finalise your accounts

• Review and approve your bills, invoices and expense claims.
• Review accounts with a late payment as well as outstanding transactions to get an overview of the entire year.
• Re-evaluate debtors on 31 March. You may also consider eliminating any outstanding debts in order to make them an expense at the end of the year.
• Include clients or suppliers that have invoiced you by 31 March or before but aren’t paid until after April. Take these costs into consideration as 2020-21 costs.

2. Clean up and reconcile your records

• Incorporate bank statement statements and year-end income tax records, sales, expense, and purchase records.
• Check your bank accounts to ensure they are reconciled and make sure they are in balance with the amounts on your bank statements.
• Prepare your profit and loss statement to calculate the annual profit your business made.

3. Review data from your payroll vendor and Inland Revenue

• Examine the data taken during EOFY to evaluate the current financial position of your business.
• Get your payroll company to provide EOFY data when you can, to allow it to be analysed.
• Access Inland Revenue records, which include PAYE tax obligations and KiwiSaver duties for staff.

4. Superannuation management

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the tax rate differing for each employee based on their salary and the length of service.
• Electronically file, as required in the event that your business pays more than $50,000 per year in PAYE tax and ESCT.

*For KiwiSaver companies, they must pay ESCT on employer contributions of 3% but not on contributions taken out of the employee’s wages.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases during the year, along with spending on repairs or maintenance, to claim any EOFY refunds.
• You should consider disposing of old stock, as provisions for obsolete stock or write-downs of stock are not typically 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 such as bonus pay, holiday pay and long-service leave.
• If your income is significantly higher than last year, consider making an additional voluntary tax payment to align your tax payments with your turnover.

6. Separate personal and business finances distinct

Tax deductions are not usually available for personal expenses. deductions for personal expenditure; it’s just business expenses. However, you may be incurring unnecessary compliance costs when your accountant is required to divide what is tax-deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 Tax on income for 2020 to be paid for those who don’t have a tax professional.
• 1 March 2021 GST return due and payment due for the end of January for businesses filing every two months.
• The deadline for filing is 31 March - 2020 income tax return due for tax professionals (with a valid extension of time).
• 1. April, 2021 The new financial year begins on the island of New Zealand.
• 7 May 2021 Final installment of tax provisional due for the fiscal year 2020 and the last 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 differ from the official date, for example, the due date is a weekend or public holiday.