Important dates and advice to help small businesses prepare for EOFY

Using intuitive accounting software and cloud storage services like Google Drive or Dropbox – and tenancy management software like myRent.co.nz can help save businesses time.

Smaller companies, like restaurants or retail stores It’s crucial to monitor the stock levels in advance of the closing date of the financial year looms.

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

A great reminder for small business owners is that a temporary increase in the write-off of assets in the moment during COVID-19 – from $500 to $5,000 – is being scaled back to $1,000 starting 17 March 2021.

This change will have a big impact on small-scale enterprises.

Three important changes to 2021

Here are some additional important tax-related tax changes that have recently occurred or are scheduled for 2021.

1. Don’t forget that your minimum wage will rise by $1.10 to increase it between $18.90 to $20 an hour starting on April 1 2021. This could affect your financial records and superannuation payment.
2. A new 39% personal tax rate will apply to incomes of more than $180,000. The new tax rate will be in effect from April 1, 2021. Tachibana states that this will more likely impact those who make a living through personal services, instead of those who own investments and earn capital gains.
3. Make sure you are aware that ACC Earners’ levy, which helps cover the costs related to injuries sustained by employees, will remain at the their current levels until 2022, to help businesses deal with the financial strains of COVID-19. As of January 20, 2021 the levy sits at $1.39 for every $100 (1.39%).

The fundamental elements of EOFY success

Here are some guidelines and dates from professionals that small business owners might wish to consider while putting their home ready for tax time.

1. Finalise your accounts

• Make sure you approve the invoices, bills and expense claims.
• Review accounts with a late payment and outstanding transactions to gain an overview of the year’s total.
• Review debtors as at 31 March. You may also consider taking any bad debts off to be considered an end-of-year deduction.
• Note clients or suppliers who paid you invoices on the 31st of March or earlier but won’t be reimbursed till after April. Take these costs into consideration as 2020-21 costs.

2. Make sure you reconcile and clean up your records

• Incorporate bank statement statements and income tax year-end records, plus sales, purchase and expense records.
• Check your bank accounts to ensure they are reconciled and ensure that the balances are the same from your bank statement.
• Make a profit and loss statement in order to calculate the annual revenue your business has earned.

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

• Review the information you have obtained during EOFY to review the current financial health of your business.
• Request your payroll provider to send EOFY details in the earliest time possible to allow it to be analysed.
• Access to Inland Revenue documents, including PAYE tax responsibilities and any KiwiSaver duties for staff.

4. Manage your superannuation

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

*For KiwiSaver businesses, they have to pay ESCT on compulsory contribution from employers of up to 3 per cent, but not on contributions taken from the wages of employees.

5. Maximise your tax refunds

• Track expenses and asset purchases during the year, plus spending on repairs or maintenance, to claim any EOFY refunds.
• You should consider disposing of old stock in light of the fact that provisions for old stock or write-downs on stock aren’t generally allowed as tax deductions.
• It is recommended to pay within 63-days after 31 March to get an employee-related expense deduction like bonuses, holiday pay, and long-service leaves.
• If your income is higher than what you earned last year, you might want to make an additional voluntary provisional tax payment to align your tax obligations to your income.

6. Maintain personal and financial finances distinct

There aren’t any tax deductions for personal expenditure; only business expenses. You could be racking up unnecessary compliance costs If your accountant must split up what’s tax deductible and what’s not.

Some key 2021 tax dates

• 9 Feb 2021 2021 – 2020 tax year due for taxpayers who don’t have a tax representative.
• 1 March 2021 - GST return and payment due for the end of January for companies that file every two months.
• 21 March - 2020 income tax return due for tax professionals (with an effective extension of time).
• 1. April, 2021 The new financial year starts on the island of New Zealand.
• 7 May 2021 Final installment of tax provisional due for 2020’s fiscal year and last chance 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 date, for example, if a due date is a weekend or public holiday.