Important dates and advice to help small businesses prepare for EOFY

Using intuitive accounting software and cloud storage services like Google Drive or Dropbox – as well as tenancy management software like myRent.co.nz - could save businesses time.

For small businesses such as restaurants or retail stores It’s crucial to track stock levels as the end of financial year approaches.

If you visit your accountant and can’t remember your stock level from just a few months ago and you’re having trouble remembering, it’s a problem.

A useful 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.

It’s a change that could be a major impact on small-scale businesses.

Three significant changes are coming in 2021.

Here are some additional significant tax-related changes that occurred recently or are scheduled for 2021.

1. Don’t forget that the minimum wage is set to increase by $1.10 and will increase up from $18.90 to $20 an hour from April 1 2021. This could affect your financial records and superannuation benefits.
2. A new personal tax rate is set to apply on income above $180,000. The new rate will apply starting on April 1st, 2021. Tachibana states that this will more likely impact those who make a living from personal service, in contrast to those who hold investments and earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, that covers the cost related to injuries sustained by employees, will be kept at level until 2022 in order 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 the success of EOFY

Here are some important guidelines and dates from professionals who small business owners might want to keep in mind while putting their home organized for tax season.

1. Finalise your accounts

• Make sure you approve the bills, invoices and expense claims.
• Check overdue accounts as well as outstanding transactions to get an overview of the year in its entirety.
• Examine debtors at the time of 31 March, and think about taking any bad debts off in order to make them an expense at the end of the year.
• List suppliers or clients who’ve paid you invoices on the 31st of March or earlier, but who won’t be paid until after April. You might want to consider treating these costs as expenses for 2020-21.

2. Make sure you reconcile and clean up your records

• Consolidate bank statements, income tax year-end documents, as well as sales, expense and purchase records.
• Check your bank accounts to ensure they are reconciled and ensure that the balances are the same from your bank statements.
• Create a profit and loss account to determine how much annual profits your business earned.

3. Check the data you received from your payroll company and Inland Revenue

• Examine the data collected during EOFY to evaluate the financial situation of your business.
• Request your payroll provider to send EOFY details when you can, so it can be analysed.
• Access to Inland Revenue records, which include PAYE tax obligations as well as any KiwiSaver obligations for employees.

4. Manage superannuation

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the rates varying for each employee based on their salary and length of service.
• File electronically, as mandated by law, if your company pays more than $50,000 per year in PAYE tax and ESCT.

*For KiwiSaver businesses, they have to pay ESCT on employee contributions up to 3%, but not on contributions taken out of wage payments to employees.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, plus expenditure on improvements or upkeep in order to claim any refunds from EOFY.
• You should consider disposing of old stock, as provisions for obsolete stock or stock write-downs are not typically allowed as tax deductions.
• Consider making payments within 63-days after 31 March, to receive the benefit of a deduction for expenses related to employees like holiday pay, bonuses and long-service leave.
• If your income is significantly more than it was last year, you may want to consider 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 Separately

Tax deductions are not usually available for personal expenses. deductions on personal expenses. If you only get deductions for business expenses. You could be incurring unnecessary compliance costs if your accountant has to separate what’s tax-deductible and what’s not.

Tax dates for 2021 are important.

• 9 February 2021 2021 – 2020 tax year to be paid for those who don’t have a tax advisor.
• 1 March 2021 - GST return due and payment due by January for businesses that file each two months.
• 21 March 2020 income tax return due for tax professionals (with a valid extension of time).
• 1 April 2021 - the new financial year begins from New Zealand.
• 7 May 2021 - final provisional tax instalment due for the fiscal year 2020 and the final opportunity to make tax provisional voluntary payments.
• 7 May 2021 Tax return for the year’s end and payment due.

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