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

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

Smaller businesses, such as restaurants or retailers It’s crucial to track stock levels as the closing date of the financial year approaches.

If you go to your accountant and can’t remember the levels of your stocks from the last few months it can cause problems.

A good reminder for smaller entrepreneurs is that an increase in the instant asset write-off during COVID-19 – from $500 to $5,000 – is being scaled back to $1,000 starting 17 March 2021.

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

3 important changes in 2021

Below are other important tax-related changes that occurred recently or are in the works for 2021.

1. Do not forget that the minimum wage will increase by $1.10 and will increase up from $18.90 to $20 an hour starting on April 1 2021. This could impact your financial records as well as superannuation payouts.
2. A new 39% personal tax rate will be applied for incomes above $180,000. The new rate will take effect from April 1, 2021. Tachibana says this is more likely to be a problem for those who earn income through personal services, rather than 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 remain at its their current levels until 2022, to assist businesses in coping the financial burdens of COVID-19. In January 2021, the levy stood at $1.39 each $100 (1.39%).

The building blocks for EOFY achievement

Here are some important tips and dates from experts which small-business owners might wish to consider while putting their home organized for tax season.

1. Finalise your accounts

• Make sure you approve the invoices, bills and expense claims.
• Monitor accounts that are due as well as outstanding transactions to get a view of the year’s total.
• Review the debtors’ accounts as of 31 March. You may also consider writing off any bad debts to be considered an end-of-year deduction.
• You should list clients or suppliers who have been invoiced on or before 31 March or earlier, but who won’t be due until the end of April. Think about treating these expenses as 2020-21 costs.

2. Clean up and reconcile your records

• Incorporate bank statement statements and year-end income tax documents, as well as sales, expense and purchase records.
• Consolidate your bank accounts and check they match the balances from your bank statement.
• Create a profit and loss account to calculate the annual profit your business made.

3. Re-read the information you receive from your payroll provider and Inland Revenue

• Assess information taken during EOFY to review the current financial position of your business.
• Ask your payroll vendor to provide EOFY data in the earliest time possible so it can be analysed.
• Access Inland Revenue records, including PAYE tax obligations and KiwiSaver obligations for employees.

4. Manage your superannuation

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the tax rate varying for each employee based on their salary and length of tenure.
• Electronically file, as required, if your business pays more than $50,000 per year in ESCT tax and PAYE tax.

*For KiwiSaver, businesses need to pay ESCT on compulsory employee contributions up to 3%, but not on contributions taken from the employee’s wages.

5. Maximise your tax refunds

• Log expenses and asset purchases throughout the year, as well as the cost of improvements or maintenance in order to claim any refunds from EOFY.
• Consider disposing of obsolete stock because provisions for the disposal of obsolete stock or write-downs on stock aren’t usually tax-deductible.
• It is recommended to pay within 63 calendar days following 31 March in order to claim the benefit of a deduction for expenses related to employees such as bonus pay, holiday pay and long-service leaves.
• If your income is substantially greater than the previous year, you might want to make an additional voluntary provisional tax payment to make sure your tax payments are aligned with your turnover.

6. Separate personal and business finances distinct

Tax deductions are not usually available for personal expenses. deductions on personal expenses. If it’s only your business expenses. You could be incurring unnecessary compliance costs If your accountant must determine what tax-deductible and the rest of it.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 - 2020 income tax due for those who do not have a tax representative.
• 1 March 2021 - GST return and payment due by the end of January for businesses that file each two months.
• 30 March 2021 Tax year 2020 return due for tax professionals (with an extended the deadline).
• 1. April, 2021 - the new financial year starts with New Zealand.
• 7 May 2021 Final proviso tax instalment due for the fiscal year 2020 and last chance 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, such as the due date occurs on a weekend, or a public holiday.