Key dates and advice to help small businesses prepare for end of financial year

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

Smaller companies, like restaurants or retail stores it is crucial to monitor stock levels when the close of the financial year looms.

If you visit your accountant but aren’t able to recall the levels of your stocks from the last few months it can cause problems.

A good reminder for smaller business owners is that a temporary increase of the immediate asset write-off period during COVID-19 from $500 to $5,000 – will be increased back to $1,000 as of 17 March 2021.

It’s a change that could affect a lot of small-scale businesses.

Three important changes to 2021

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

1. Don’t forget that your minimum wage is set to increase by $1.10 increasing it between $18.90 to $20 an hour from April 1 2021. This could impact your financial records and superannuation benefits.
2. A new personal tax rate will be imposed for incomes above $180,000. The new tax rate will be in effect from 1 April 2021. Tachibana states that this is more likely to affect those who earn income by providing personal services rather than those who hold investment accounts and are able to earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, which funds the costs that are incurred by injuries to employees, will be kept at current levels until 2022 to assist businesses in coping with the financial pressures of COVID-19. In January 2021, the levy sits at $1.39 100 cents (1.39 percent).

The foundational elements for EOFY the success of EOFY

Here are some important advice and dates from experts which small-business owners might wish to consider when getting their house up and running for tax time.

1. Finalise your accounts

• Make sure you approve the invoices, bills and expense claims.
• Check overdue accounts as well as outstanding transactions to get a view of the entire year.
• Review debtors as at 31 March, and think about taking any bad debts off so they are considered an expense at the end of the year.
• List suppliers or clients who’ve been invoiced on or before 31 March or before but will not be due until the end of April. You might want to consider treating these costs as 2020-21 costs.

2. Make sure you reconcile and clean up your files

• Consolidate bank statements, year-end income tax documents, as well as sales, expenses, 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 determine the amount of annual profits your business earned.

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

• Check the information taken during EOFY to review the current financial situation of your business.
• Request your payroll provider to send EOFY details as soon as you can so that it can be reviewed.
• Access to Inland Revenue documents, including PAYE tax obligations and KiwiSaver duties for staff.

4. Manage your superannuation

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

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

5. Maximise your tax refunds

• Record all expenses and purchases of assets throughout the year, as well as expenditure on improvements or upkeep in order to claim any EOFY refunds.
• Consider disposing of obsolete stock since provisions for obsolete stock or write-downs of stock are not usually tax-deductible.
• Make sure to make payments within 63 days after 31 March to obtain an allowance for employee-related expenses like holiday pay, bonuses and long-service leave.
• If your income is significantly higher than what you earned last year, you may want to consider an additional provisional tax payment to ensure that your tax payment is aligned with your turnover.

6. Maintain personal and financial finances Separately

It is not common to get tax deductions for personal expenses. it’s only your 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 Income tax for 2020 due for those who do not have a tax advisor.
• 1 March 2021 - GST return due and payment due by January for companies that file every two months.
• 31 March 2021 Tax year 2020 return due for clients of tax professionals (with an extension valid for the deadline).
• 1. April, 2021 The new financial year begins in New Zealand.
• 7 May 2021 Final installment of tax provisional due for 2020’s fiscal year and the final opportunity to make voluntary tax payments.
• 7 May 2021 GST tax return at the end of the year and due payment.

Notice: Some dates may differ from the official deadline, such as when the due date is a weekend or public holiday.