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

The use of intuitive accounting software and cloud storage options like Google Drive or Dropbox – and tenancy management software such as myRent.co.nz can help save businesses time.

Smaller companies, like restaurants or retail stores it is crucial to keep track of stock levels as the end of financial year draws near.

If you go to your accountant, and you are unable to recall the stock levels you had a couple of months ago this can lead to problems.

A good reminder for small business owners is that a temporary increase in the asset write-off in an instant during COVID-19 from $500 to $5,000 – will be increased back to $1,000 starting 17 March 2021.

That’s a change that will affect a lot of small-scale companies.

Three significant changes are coming in 2021.

These are just a few of the significant tax-related changes that have recently occurred or are scheduled for 2021.

1. Do not forget that the minimum wage is set to increase by $1.10, taking it from $18.90 to $20 per hour from April 1 2021. This could affect your financial records and superannuation payouts.
2. A new personal tax rate will be applied on income above $180,000. The new rate will apply from April 1, 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 investment accounts and are able to earn capital gains.
3. Take note that ACC Earners’ levy, which funds the costs of injuries suffered by employees will remain at current levels until 2022 to assist businesses in coping with the financial strains of COVID-19. As of January 20, 2021 the levy stood at $1.39 per $100 (1.39%).

The foundational elements for EOFY achievement

Here are some guidelines and dates from professionals that small business owners might be able to remember as they get their home in order for tax time.

1. Finalise your accounts

• Review and approve your bills, invoices and expense claims.
• Follow up overdue accounts as well as outstanding transactions to get an overview of the year in its entirety.
• Review debtors as at 31 March. You may also consider eliminating any outstanding debts so they are considered an end-of-year deduction.
• You should list clients or suppliers who have been invoiced on or before 31 March or earlier but will not be reimbursed till after April. Take these costs into consideration as 2020-21 expenses.

2. Clean up and reconcile your files

• Consolidate bank statements, year-end income tax and sales records, along with expense and purchase records.
• Consolidate your bank accounts and ensure that the balances are the same from your bank statements.
• Prepare your profit and loss statement to work out how much annual profits your business earned.

3. Review data from your payroll vendor and Inland Revenue

• Assess information obtained during EOFY to determine the financial situation of your business.
• Contact your payroll provider to provide EOFY data when you can, so that it can be analyzed.
• Access to Inland Revenue information, including PAYE tax obligations, as well as KiwiSaver obligation for workers.

4. Manage your superannuation

• Update your employer superannuation contribution tax (ESCT) rates*, with rates dependent on their earnings and length of their tenure.
• Filing electronically, as required in the event that your business pays $50k or more in ESCT tax and PAYE tax.

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

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases throughout the year, as well as spending on repairs or maintenance for claiming any refunds from EOFY.
• Take into consideration disposing of stocks that are no longer in use because provisions for the disposal of obsolete stock or write-downs of stock are not typically allowed as tax deductions.
• It is recommended to pay within 63-days after 31 March to get a deduction for employee-related expenses such as bonus pay, holiday pay and long-service leave.
• If your income is substantially greater than the previous year, consider making an additional tax provisional payment to align your tax obligations with your turnover.

6. Keep business and personal finances separated

Tax deductions are not usually available for personal expenses. deductions for personal expenses. it’s only your business expenses. You could be adding unnecessary compliance costs if your accountant has to split up what’s tax deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 2021 – 2020 tax year due for those who do not have a tax professional.
• 1 March 2021 GST return and tax due by January for those who file their GST returns every two months.
• 21 March - 2020 income tax return due for clients of tax agents (with a valid extension of the deadline).
• 1. April, 2021 - the new financial year starts in New Zealand.
• 7 May 2021 - final provisional tax instalment due for 2020’s fiscal year and last chance to make voluntary tax payments.
• 7 May 2021 Tax return for the year’s end and due payment.

Note: Some dates may differ from the official deadline, for example if a due date occurs on a weekend, or a public holiday.