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

Utilizing intuitive accounting software and cloud storage options like Google Drive or Dropbox – along with tenancy management software such as myRent.co.nz - could save businesses time.

Smaller businesses, such as restaurants and retailers it is crucial to monitor the stock levels in advance of the close of the financial year is near.

If you visit your accountant, and you are unable to recall the stock levels you had the last few months it can cause problems.

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

It’s a change that could have a big impact on small businesses.

Three important changes to 2021

Below are other significant tax-related changes that took place recently or are planned for 2021.

1. Don’t forget that your minimum wage is set to increase by $1.10 and will increase between $18.90 to $20 an hour starting on April 1 2021. This could potentially affect your financial records as well as superannuation benefits.
2. A new 39% personal tax rate will be imposed to incomes of more than $180,000. The new tax rate will be in effect from 1 April 2021. Tachibana believes it is more likely to affect those who earn a living through personal services, rather than those who hold investments and earn capital gains.
3. Make sure you are aware that ACC Earners’ levy, that helps pay for the expenses that are incurred by injuries to employees, will be kept at their current levels until 2022, to help businesses cope the financial burdens of COVID-19. As at January 2021, the levy is $1.39 100 cents (1.39%).

The building blocks for EOFY successful EOFY

Here are some helpful advice and dates from experts which small-business owners might want to keep in mind while putting their home in order for tax time.

1. Finalise your accounts

• Review and approve your bills, invoices and expense claims.
• Review accounts with a late payment and outstanding transactions to get an overview of the year in its entirety.
• Review debtors as at 31 March. Consider taking any bad debts off so that they can be counted as an annual deduction at the end of the year.
• List suppliers or clients who’ve invoiced you by 31 March or earlier but won’t be paid until after April. Consider treating these costs as expenses for 2020-21.

2. Make sure you reconcile and clean up your files

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

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

• Assess information taken during EOFY to determine the current financial health of your business.
• Contact your payroll provider to send EOFY details in the earliest time possible to allow it to be analysed.
• Access Inland Revenue information, including PAYE tax obligations and KiwiSaver obligation for workers.

4. Superannuation is a key component of the financial system.

• Change your employer’s superannuation tax (ESCT) rates*, with rates different for each employee depending on their salary and length of employment.
• Filing electronically, as required, if your business pays at least $50,000 in tax on PAYE and ESCT.

*For KiwiSaver, businesses need to pay ESCT on compulsory employers’ contributions of 3 percent but not on contributions taken from wage payments to employees.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases in the course of the year, and expenditure on improvements or upkeep to claim any refunds from EOFY.
• You should consider disposing of old stock in light of the fact that provisions for old stock or stock write-downs are not typically allowed as tax deductions.
• Make sure to make payments within 63 calendar days following 31 March to obtain an employee-related expense deduction such as bonuses, holiday pay, and long-service leave.
• If your income is more than it was last year, you might want to make an additional provisional tax payment to ensure that your tax payment is aligned to your income.

6. Make sure that personal and business finances are separated

Tax deductions are not usually available for personal expenses. deductions for personal expenses; only business expenses, you could add unnecessary compliance charges If your accountant must split up what’s tax deductible and the rest of it.

Important tax dates in 2021

• 9 February 2021 2021 – 2020 tax year due for those who don’t have a tax agent.
• 1 March 2021 GST return and due by January for businesses filing every two months.
• 31 March 2021 - 2020 income tax return due for clients of tax agents (with an extended the deadline).
• 1. April, 2021 the start of the new financial year starts on the island of New Zealand.
• 7 May 2021 - final installment of tax provisional due for the 2020 financial year and the last opportunity to make provisional tax payments.
• 7 May 2021 Tax return for the year’s end and due payment.

NOTE: Some dates may differ from the date, for example, when a due date falls on a holiday weekend or public holiday.