Important dates and advice to help small businesses get ready for end of financial year

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

Smaller businesses, such as restaurants or retail stores, it’s especially important to keep track of stock levels as the closing date of the financial year draws near.

If you go to your accountant, and you are unable to recall the levels of your stocks from just a few months ago, that creates difficulties.

A good reminder for small entrepreneurs is that a temporary increase of the asset write-off in an instant during COVID-19 – from $500 up to $5,000 – is set to be lowered back to $1,000 from 17 March 2021.

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

Three significant changes are coming in 2021.

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

1. Don’t forget that the minimum wage will rise by $1.10 and will increase up from $18.90 to $20 an hour from April 1 2021. This could impact your financial records as well as superannuation payments.
2. A new personal tax rate will apply for incomes above $180,000. The new rate will take effect from April 1, 2021. Tachibana believes this will more likely impact those who make a living from providing personal services, in contrast to those who hold an investment and enjoy capital gains.
3. Take note that ACC Earners’ levy, which funds the costs of injuries suffered by employees will be kept at current levels until 2022 to help companies deal the financial burdens of COVID-19. In January 2021, the levy was $1.39 each $100 (1.39%).

The essential elements to EOFY the success of EOFY

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

1. Finalise your accounts

• Check and approve your invoices, bills and expense claims.
• Monitor accounts that are due as well as outstanding transactions to get an overview of the entire year.
• Examine debtors at the time of 31 March. Consider the possibility of writing off any bad debts so that they can be counted as an expense at the end of the year.
• You should list clients or suppliers who have paid you invoices on the 31st of March or before, but who won’t be invoiced until April. Take these costs into consideration as 2020-21 expenses.

2. Make sure you reconcile and clean up your records

• Combine bank accounts, tax year-end statements, records, sales, purchase and expense records.
• Reconcile your bank accounts , and ensure that the balances are the same on your bank statements.
• Make a profit and loss statement in order to determine how much annual profit your business made.

3. Examine the information from your payroll company and Inland Revenue

• Check the information collected during EOFY to determine the financial situation of your business.
• Request your payroll provider to submit EOFY data when you can, to allow it to be analysed.
• Access to Inland Revenue records, including PAYE tax responsibilities and any KiwiSaver obligations for employees.

4. Manage superannuation

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the rates dependent on their salary and the length of service.
• Electronically file, as required, if your business pays at least $50,000 in ESCT tax and PAYE tax.

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

5. Maximise your tax refunds

• Log expenses and asset purchases during the year, plus the cost of improvements or maintenance for claiming any EOFY refunds.
• You should consider disposing of old stock, as provisions for obsolete stock or write-downs on stock aren’t generally allowed as tax deductions.
• It is recommended to pay within 63-days after 31 March to obtain an allowance for employee-related expenses such as bonuses, holiday pay, or long-service leaves.
• If your income is significantly greater than the previous year, consider making an additional voluntary provisional tax payment to align your tax payments with your turnover.

6. Maintain personal and financial finances separate

It is not common to get tax deductions for personal expenditure; you only get deductions for business expenses. You could be incurring unnecessary compliance costs If your accountant must split up what’s tax deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 Income tax for 2020 due for taxpayers who don’t have a tax agent.
• 1 March 2021 GST return and due for the end of January for businesses that file each two months.
• The deadline for filing is 31 March 2021 – 2020 tax return due for clients of tax agents (with an extension valid for the deadline).
• 1 April 2021 the start of the new financial year starts from New Zealand.
• 7 May 2021 - final provisional tax instalment due for the 2020 financial year and last chance to make provisional tax payments.
• 7 May 2021 Tax return for the year’s end and due payment.

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