Important dates and tips to help small businesses prepare for EOFY

Using intuitive accounting software and cloud storage such as Google Drive or Dropbox – along with tenancy management software such as myRent.co.nz and myRent.co.nz – can help businesses save time.

For smaller businesses like restaurants or retail stores It’s particularly important to monitor stock levels when the close of the financial year draws near.

If you visit your accountant and are unable to remember your stock levels from a couple of months ago it can cause problems.

A useful reminder for small business owners is that a temporary boost in the instant asset write-off during COVID-19 – from $500 up to $5,000 – is being scaled back to $1,000 as of 17 March 2021.

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

3 significant changes for 2021

Here are some additional important tax-related reforms which have occurred recently or are in the works for 2021.

1. Don’t forget that your minimum wage will rise by $1.10 and will increase up from $18.90 to $20 an hour starting on April 1 2021. This could affect your financial records as well as superannuation payment.
2. A new personal tax rate will be applied on income above $180,000. The new rate will apply from 1 April 2021. Tachibana believes this is likely to affect those who earn a living from personal service, as opposed to those who have investments and earn capital gains.
3. Make sure you are aware that ACC Earners’ levy, which funds the costs associated with employee injuries, will remain at present levels until 2022 to assist businesses in coping the financial burdens of COVID-19. In January 2021, the levy sits at $1.39 100 cents (1.39 percent).

The foundational elements for EOFY achievement

Here are some guidelines and dates from professionals which small-business owners might need to be aware of as they get their home in order for tax time.

1. Finalise your accounts

• Review and approve your bills, invoices and expense claims.
• Check overdue accounts and outstanding transactions for an overview of the entire year.
• Re-evaluate debtors on 31 March, and think about taking any bad debts off to be considered an annual deduction at the end of the year.
• You should list clients or suppliers who have invoiced you by 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. Make sure you reconcile and clean up your records

• Consolidate bank statements, tax year-end statements, and sales records, along with expense, and purchase records.
• Consolidate your bank accounts and verify that they are in line with the balances from your bank statements.
• Create a profit and loss account to calculate the annual profit your business made.

3. Examine the information from your payroll vendor as well as Inland Revenue

• Review the information you have obtained during EOFY to determine the current financial health of your business.
• Ask your payroll vendor to provide EOFY data as early as possible so that it can be analyzed.
• Access Inland Revenue records, which include PAYE tax obligations, as well as KiwiSaver obligations for employees.

4. Superannuation management

• Update your employer superannuation contribution tax (ESCT) rates*, with the rates different for each employee depending on their income and length of service.
• You must file electronically, in accordance with the mandate, if your business pays $50k or more in ESCT tax and PAYE tax.

*For KiwiSaver, businesses need to pay ESCT for compulsory employer contributions of 3% but not on contributions taken out of employee wages.

5. Maximise your tax refunds

• Track expenses and asset purchases during the year, plus the cost of improvements or maintenance in order to claim any refunds from EOFY.
• Think about disposing of stock that is no longer needed, as provisions for obsolete stock or stock write-downs aren’t typically allowed as tax deductions.
• It is recommended to pay within 63 days after 31 March to get the benefit of a deduction for expenses related to employees like bonus pay, holiday pay and long-service leave.
• If your income is significantly higher than last year, think about making an additional voluntary tax payment to make sure your tax payments are aligned with your earnings.

6. Separate personal and business finances separate

Tax deductions are not usually available for personal expenses. deductions for personal expenses; it’s just business expenses. You could be adding unnecessary compliance costs in the event that your accountant needs to separate what’s tax-deductible and the rest of it.

Tax dates for 2021 are important.

• 9 Feb 2021 Tax on income for 2020 due for those who do not have a tax advisor.
• 1 March 2021 - GST return and due by the end of January for businesses filing every two months.
• 31 March 2021 Tax year 2020 return due for tax professionals (with an effective extension of time).
• 1. April, 2021 - the new financial year starts in New Zealand.
• 7 May 2021 - final installment of tax provisional due for the 2020 financial year and the last opportunity to make tax provisional voluntary payments.
• 7 May 2021 Tax return for the year’s end and payment due.

NOTE: Some dates may vary from the official deadline, such as when a due date occurs on a weekend, or a public holiday.