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

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

For small businesses such as restaurants and retailers It’s particularly important to keep track of stock levels as the time for the end of the fiscal year approaches.

If you go to your accountant and are unable to remember your stock levels from just a few months ago it can cause problems.

A good reminder for smaller entrepreneurs is that an increase in the write-off of assets in the moment during COVID-19 – from $500 to $5,000 – is set to be lowered back to $1,000 starting 17 March 2021.

This change will have a big impact on small-scale businesses.

3 important changes in 2021

Below are other important tax-related tax changes that took place recently or are on the agenda for 2021.

1. Don’t forget that your minimum wage is set to increase by $1.10 increasing it up from $18.90 to $20 an hour on April 1, 2021. It could affect your financial records and superannuation payments.
2. A new personal tax rate is set to apply for incomes above $180,000. The new tax rate is effective starting on April 1st, 2021. Tachibana believes this is more likely to be a problem for those who earn income from providing personal services, in contrast to those who hold investments and earn capital gains.
3. Be aware that the ACC Earners’ levy, that helps pay for the expenses that are incurred by injuries to employees, will be kept at their current levels until 2022, to help businesses cope with the financial pressures of COVID-19. As of January 20, 2021 the levy is $1.39 100 cents (1.39 percent).

The fundamental elements of EOFY the success of EOFY

Here are some key advice and dates from experts who small business owners might wish to consider while putting their home in order for tax time.

1. Finalise your accounts

• Check and approve your bills, invoices and expense claims.
• Follow up overdue accounts and outstanding transactions for a view of the year’s total.
• Review debtors as at 31 March. You may also consider the possibility of writing off any bad debts to be considered an annual deduction at the end of the year.
• Note clients or suppliers who invoiced you on 31 March or earlier but won’t be paid until after April. Consider treating these costs as 2020-21 costs.

2. Make sure you reconcile and clean up your files

• Consolidate bank statements, tax year-end statements, records, plus sales, purchase and expense records.
• Consolidate your bank accounts and make sure they are in balance with the amounts from your bank statements.
• Create a profit and loss account to work out how much annual profits your business earned.

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

• Assess information taken during EOFY to assess the current financial condition of your company.
• Request your payroll provider to submit EOFY data when you can, so that it can be analyzed.
• Access to Inland Revenue documents, including PAYE tax obligations, as well as KiwiSaver duties for staff.

4. Superannuation management

• Update your employer superannuation contribution tax (ESCT) rates*, with the rates differing for each employee based on their earnings and length of service.
• File electronically, as mandated in the event that your business pays at least $50,000 in ESCT and PAYE taxes.

*For KiwiSaver, businesses need to pay ESCT on mandatory employee contributions up to 3% but not on contributions taken out of the wages of employees.

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.
• You should consider disposing of old stock because provisions for the disposal of obsolete stock or stock write-downs are not usually tax-deductible.
• You should consider making your payments within 63 days of 31 March, to receive a deduction for employee-related expenses like bonuses, holiday pay, and long-service leaves.
• If your income is significantly greater than the previous year, think about making an additional tax provisional payment to ensure that your tax payment is aligned with turnover.

6. Make sure that personal and business finances are Separately

Tax deductions are not usually available for personal expenses. deductions on personal expenses. If only business expenses, you could be adding unnecessary compliance costs in the event that your accountant needs to determine what tax-deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 2021 – 2020 tax year to be paid for those who don’t have a tax representative.
• 1 March 2021 GST return due and payment due by January for companies that file every two months.
• The deadline for filing is 31 March 2021 – 2020 tax return due for clients of tax professionals (with a valid extension of the deadline).
• 1 April 2021 - the new financial year starts with New Zealand.
• 7 May 2021 - final installment of the tax proviso for the fiscal year 2020 and last chance to make provisional tax payments.
• 7 May 2021 GST tax return at the end of the year and payment due.

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