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

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

Smaller companies, like restaurants or retailers It’s crucial to keep track of stock levels as the end of financial year approaches.

If you visit your accountant and can’t remember the stock levels you had just a few months ago it can cause problems.

A good reminder for small entrepreneurs is that a temporary boost in the write-off of assets in the moment during COVID-19, from $500 to $5,000 – will be increased back to $1,000 starting 17 March 2021.

This is a change that will have a big impact on small-scale enterprises.

3 significant changes for 2021

Here are some additional important tax-related reforms that have recently occurred or are on the agenda for 2021.

1. Remember that the minimum wage is set to increase by $1.10 and will increase from $18.90 to $20 an hour starting on April 1 2021. This could affect your financial records as well as superannuation benefits.
2. A new 39% personal tax rate will apply for incomes above $180,000. The new rate will apply starting on April 1st, 2021. Tachibana believes it is more likely to be a problem for those who earn income through personal services, instead of those who own the shares and make capital gains.
3. Be aware that the ACC Earners’ levy, which funds the costs associated with employee injuries, will remain at level until 2022 in order to assist businesses in coping with the financial pressures of COVID-19. As at January 2021, the levy stood at $1.39 each $100 (1.39%).

The fundamental elements of EOFY achievement

Here are some important information and dates from experts that small-business owners may need to be aware of when getting their house in order for tax time.

1. Finalise your accounts

• Make sure you approve the bills, invoices and expense claims.
• Review accounts with a late payment and outstanding transactions for an overview of the year in its entirety.
• Examine debtors at the time of 31 March, and think about the possibility of writing off any bad debts so that they can be counted as an expense at the end of the year.
• Note clients or suppliers who invoiced you by 31 March or earlier but aren’t paid until after April. Think about treating these expenses as 2020-21 costs.

2. Clean up and reconcile your records

• Combine bank accounts, year-end income tax records, plus sales, expense and purchase records.
• Check your bank accounts to ensure they are reconciled and verify that they are in line with the balances from your bank statements.
• Prepare your profit and loss statement to work out how much profits your company made annually.

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

• Review the information you have that you have collected during EOFY to review the current financial condition of your company.
• Request your payroll provider to provide EOFY data as early as possible to allow it to be analysed.
• Access to Inland Revenue documents, including PAYE tax responsibilities and any KiwiSaver obligation for workers.

4. Manage your superannuation

• Change your employer’s superannuation tax (ESCT) rates*, with the rates dependent on their salary and the length of service.
• Electronically file, as required in the event that your business pays $50,000 or more a year in ESCT tax and PAYE tax.

*For KiwiSaver companies, they must pay ESCT on mandatory employer contributions of 3%, but not on contributions taken out of the wages of employees.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases in the course of the year, and expenses for improvements or maintenance in order to claim any refunds from EOFY.
• Think about disposing of stock that is no longer needed, as provisions for obsolete stock or stock write-downs are not generally allowed as tax deductions.
• It is recommended to pay within 63-days after 31 March, to receive the benefit of a deduction for expenses related to employees like bonuses, holiday pay, and long-service leave.
• If your income is higher than what you earned last year, consider making an additional tax provisional payment to make sure your tax payments are aligned with turnover.

6. Keep business and personal finances Separately

You generally don’t get tax deductions for personal expenditure; it’s only your business expenses. However, you may be racking up unnecessary compliance costs in the event that your accountant needs to separate what’s tax-deductible and what’s not.

Some key 2021 tax dates

• 9 Feb 2021 - 2020 income tax due for those who don’t have a tax professional.
• 1 March 2021 GST return due and payment due by January for companies that file every two months.
• 30 March 2021 Tax year 2020 return due for tax agents (with a valid extension of the deadline).
• 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 last opportunity to make voluntary tax payments.
• 7 May 2021 GST tax return at the end of the year and payment due.

Notice: Some dates may differ from the official deadline, for instance if a due date falls on a weekend or public holiday.