Important dates and tips to help small businesses prepare for end of financial year

The use of intuitive accounting software and cloud storage like Google Drive or Dropbox – along with tenancy management software like myRent.co.nz and myRent.co.nz – can help businesses save time.

Smaller businesses, such as restaurants or retail stores It’s crucial to monitor stock levels when the end of financial year is near.

If you go to your accountant but aren’t able to recall the levels of your stocks from just a few months ago this can lead to problems.

A good reminder for smaller entrepreneurs is that an increase in the instant asset write-off during COVID-19 – from $500 to $5,000 – is being scaled back to $1,000 beginning 17 March 2021.

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

Three significant changes are coming in 2021.

Below are other important tax-related tax changes which have occurred recently or are scheduled for 2021.

1. Remember that the minimum wage will rise by $1.10, taking it between $18.90 to $20 per hour from April 1 2021. This could affect your financial records as well as superannuation payouts.
2. A new personal tax rate will be imposed on income above $180,000. The new tax rate is effective starting on April 1st, 2021. Tachibana states that it is more likely to affect those who earn a living from personal service, rather than those who hold investments and earn capital gains.
3. Be aware that the ACC Earners’ levy, which funds the costs related to injuries sustained by employees, will be kept at their current levels until 2022, to help businesses cope with the financial burdens of COVID-19. At the time of January 2021 the levy was $1.39 each $100 (1.39%).

The fundamental elements of EOFY success

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

1. Finalise your accounts

• Examine and approve your invoices, bills and expense claims.
• Review accounts with a late payment and outstanding transactions for a view of the entire year.
• Examine debtors at the time of 31 March. Consider writing off any bad debts in order to make them an expense at the end of the year.
• Include clients or suppliers that have been invoiced on or before 31 March or before but will not be due until the end of April. Take these costs into consideration as 2020-21 costs.

2. Clean up and reconcile your files

• Bank statements should be consolidated, tax year-end statements, records, plus sales, expenses, and purchase records.
• Reconcile your bank accounts , and check they match the balances from your bank statement.
• Make a profit and loss statement in order to calculate the profits your company made annually.

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

• Review the information you have collected during EOFY to evaluate the financial position of your business.
• Contact your payroll provider to supply EOFY information when you can, so it can be analysed.
• Access Inland Revenue records, which include PAYE tax obligations and KiwiSaver obligation for workers.

4. Manage your superannuation

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the rate varying for each employee based on their salary and length of service.
• File electronically, as mandated, if your business pays at least $50,000 in ESCT tax and PAYE tax.

*For KiwiSaver, businesses need to pay ESCT on employer contributions of 3% but not on contributions taken from wage payments to employees.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, plus expenses for improvements or maintenance in order to claim any EOFY refunds.
• Think about disposing of stock that is no longer needed since provisions for obsolete stock or write-downs on stock aren’t typically tax-deductible.
• You should consider making your payments within 63 calendar days following 31 March, to receive the benefit of a deduction for expenses related to employees such as bonuses, holiday pay, or long-service leaves.
• If your earnings are significantly greater than the previous year, you may want to consider an additional provisional tax payment to align your tax obligations to your income.

6. Make sure that personal and business finances are Separately

It is not common to get tax deductions for personal expenditure; it’s only your business expenses. You could be incurring unnecessary compliance costs if your accountant has to divide what is tax-deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 2021 – 2020 tax year due for those who do not have a tax representative.
• 1 March 2021 GST return due and payment due by January for businesses filing every two months.
• 21 March - 2020 income tax return due for clients of tax agents (with an extended time).
• 1 April 2021 The new financial year starts from New Zealand.
• 7 May 2021 Final proviso tax instalment due for 2020’s fiscal year and the last opportunity to make voluntary provisional tax payments.
• 7 May 2021 End-of-year GST return and due payment.

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