Key dates and tips to help small businesses get ready for EOFY

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

Smaller businesses, such as restaurants or retailers, it’s especially important to monitor stock levels when the closing date of the financial year is near.

If you visit your accountant but aren’t able to recall your stock levels from the last few months this can lead to problems.

A good reminder for smaller business owners is that a temporary increase of the asset write-off in an instant during COVID-19 from $500 to $5,000 – will be scaled back to $1,000 beginning 17 March 2021.

This change will be a major impact on small-scale enterprises.

3 significant changes for 2021

Here are some additional important tax-related tax changes that took place recently or are on the agenda for 2021.

1. Do not forget that the minimum wage will rise by $1.10 to increase it up from $18.90 to $20 an hour from April 1 2021. It could affect your financial records and superannuation benefits.
2. A new 39% personal tax rate will apply on income above $180,000. The new tax rate will be in effect beginning on April 1, 2021. Tachibana states that this is likely to affect those who earn income from providing personal services, rather than those who hold investment accounts and are able to earn capital gains.
3. Take note that ACC Earners’ levy, which helps cover the costs of injuries suffered by employees will remain at its level until 2022 in order to assist businesses in coping with the financial strains of COVID-19. As at January 2021, the levy stood at $1.39 each $100 (1.39 percent).

The fundamental elements of EOFY successful EOFY

Here are some tips and dates from experts that small-business owners may be able to remember when getting their house in order for tax time.

1. Finalise your accounts

• Check and approve your bills, invoices and expense claims.
• Monitor accounts that are due and outstanding transactions to gain an overview of the entire year.
• Re-evaluate debtors on 31 March, and think about taking any bad debts off so that they can be counted as a year-end deduction.
• List suppliers or clients who’ve been invoiced on or before 31 March or before but aren’t reimbursed till after April. You might want to consider treating these costs as 2020-21 costs.

2. Clean up and reconcile your records

• Incorporate bank statement statements and 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 on your bank statements.
• Make a profit and loss statement in order to determine how much annual profit your business made.

3. Review data from your payroll provider and Inland Revenue

• Assess information collected during EOFY to determine the current financial condition of your company.
• Contact your payroll provider to send EOFY details when you can, so that it can be reviewed.
• Access Inland Revenue information, including PAYE tax obligations as well as any KiwiSaver requirements for the employees.

4. Manage your superannuation

• Update your employer superannuation contribution tax (ESCT) rates*, with the rate dependent on their earnings and length of their tenure.
• Filing electronically, as required in the event that your business pays more than $50,000 per year in ESCT and PAYE taxes.

*For KiwiSaver companies, they must pay ESCT on mandatory employer contributions of 3% but not on contributions that are deducted from the employee’s wages.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases throughout the year, as well as spending on repairs or maintenance in order to claim any refunds from EOFY.
• Take into consideration disposing of stocks that are no longer in use in light of the fact that provisions for old stock or stock write-downs aren’t generally allowed as tax deductions.
• Consider making payments within 63-days after 31 March in order to claim an employee-related expense deduction like bonus pay, holiday pay and long-service leaves.
• If your earnings are significantly more than it was last year, you might want to make an additional provisional tax payment to align your tax obligations with your turnover.

6. Maintain personal and financial finances Separately

It is not common to get tax deductions for personal expenses; you only get deductions for business expenses, you could add unnecessary compliance charges in the event that your accountant needs to divide what is tax-deductible and what’s not.

Tax dates for 2021 are important.

• 9 Feb 2021 Income tax for 2020 due 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.
• 31 March 2021 Tax year 2020 return due for tax agents (with an effective extension of time).
• 1. April, 2021 the start of the new financial year begins with New Zealand.
• 7 May 2021 - final installment of tax provisional due for the fiscal year 2020 and the final opportunity to make voluntary provisional tax payments.
• 7 May 2021 GST tax return at the end of the year and due payment.

Note: Some dates may be different from the official deadline, such as if a due date occurs on a weekend, or a public holiday.