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

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

Smaller companies, like restaurants or retail stores It’s crucial to keep track of stock levels as the end of financial year is near.

If you visit your accountant but aren’t able to recall your stock levels from a couple of months ago this can lead to problems.

A good reminder for smaller entrepreneurs is that a temporary increase of the immediate asset write-off period during COVID-19 from $500 to $5,000 – will be scaled back to $1,000 as of 17 March 2021.

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

3 significant changes for 2021

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

1. Don’t forget that the minimum wage will rise by $1.10, taking it between $18.90 to $20 an hour starting on April 1 2021. This could potentially affect your financial records and superannuation payment.
2. A new personal tax rate is set to apply on income above $180,000. The new tax rate is effective from 1 April 2021. Tachibana claims that it is more likely to be a problem for those who earn income through personal services, instead of those who own investments and earn capital gains.
3. Take note that ACC Earners’ levy, that helps pay for the expenses associated with employee injuries, will remain at the current levels until 2022 to assist businesses in coping with the financial pressures of COVID-19. As of January 20, 2021 the levy stood at $1.39 per $100 (1.39 percent).

The building blocks for EOFY successful EOFY

Here are some helpful information and dates from experts that small-business owners may want to keep in mind as they get their home ready for tax time.

1. Finalise your accounts

• Check and approve your invoices, bills and expense claims.
• Check overdue accounts and outstanding transactions to gain a view of the year in its entirety.
• Review the debtors’ accounts as of 31 March and consider taking any bad debts off so they are considered an end-of-year deduction.
• You should list clients or suppliers who have paid you invoices on the 31st of March or before but won’t be reimbursed till after April. Think about treating these expenses as expenses for 2020-21.

2. Clean up and reconcile your files

• Consolidate bank statements, year-end income tax records, plus sales, expense, and purchase records.
• Check your bank accounts to ensure they are reconciled and make sure they are in balance with the amounts on your bank statements.
• Prepare your profit-and-loss statement to determine how much profits your company made annually.

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

• Examine the data taken during EOFY to evaluate the current financial position of your business.
• Contact your payroll provider to provide EOFY data as early as possible so it can be analysed.
• Access Inland Revenue information, including PAYE tax obligations, as well as KiwiSaver obligations for employees.

4. Superannuation management

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the rate dependent on their earnings and length of tenure.
• Electronically file, as required when your business is paying more than $50,000 per year in tax on PAYE and ESCT.

*For KiwiSaver companies, they must pay ESCT on mandatory employee contributions up to 3% but not on contributions taken from the employee’s wages.

5. Maximise your tax refunds

• Log expenses and asset purchases throughout the year, as well as the cost of improvements or maintenance for claiming any EOFY refunds.
• Consider disposing of obsolete stock because provisions for the disposal of obsolete stock or write-downs on stock aren’t typically tax-deductible.
• It is recommended to pay within 63 days of 31 March, to receive an allowance for employee-related expenses such as bonus pay, holiday pay and long-service leaves.
• If your income is significantly more than it was last year, consider making an additional tax provisional payment to make sure your tax payments are aligned to your income.

6. Maintain personal and financial finances separate

It is not common to get tax deductions for personal expenses. it’s only your company expenses. But you might be incurring unnecessary compliance costs when your accountant is required to divide what is tax-deductible and what’s not.

Tax dates for 2021 are important.

• 9 February 2021 2021 – 2020 tax year due for those who don’t have a tax advisor.
• 1 March 2021 GST return due and payment due at the end of January for those who file their GST returns every two months.
• 21 March - 2020 income tax return due for clients of tax professionals (with an effective 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 financial year 2020 and the last opportunity to make voluntary tax payments.
• 7 May 2021 Tax return for the year’s end and due payment.

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