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

The use of intuitive accounting software and cloud storage like Google Drive or Dropbox – in addition to tenancy administration software like myRent.co.nz - could save businesses time.

Smaller businesses, such as retailers or restaurants It’s crucial to track stock levels as the close of the financial year is near.

If you visit your accountant but aren’t able to recall the stock levels you had the last few months, that creates difficulties.

A good reminder for smaller entrepreneurs is that a temporary boost 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 as of 17 March 2021.

This is a change that will have a big impact on small businesses.

Three important changes to 2021

These are just a few of the important tax-related reforms that took place recently or are scheduled for 2021.

1. Do not forget that the minimum wage is set to increase by $1.10 to increase it from $18.90 to $20 per hour as of 1 April 2021. This could impact your financial records and superannuation payments.
2. A new personal tax rate will be applied on income above $180,000. The new rate will take effect beginning on April 1, 2021. Tachibana says this will more likely be a problem for those who earn income by 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 present levels until 2022 to help businesses deal with the financial burdens of COVID-19. In January 2021, the levy stood at $1.39 for every $100 (1.39%).

The fundamental elements of EOFY the success of EOFY

Here are some important advice and dates from experts who small business owners might need to be aware of as they get their home ready for tax time.

1. Finalise your accounts

• Examine and approve your invoices, bills and expense claims.
• Monitor accounts that are due as well as outstanding transactions to get a view of the entire year.
• Re-evaluate debtors on 31 March. You may also consider taking any bad debts off so they are considered an annual deduction at the end of the year.
• List suppliers or clients who’ve invoiced you by 31 March or earlier but aren’t due until the end of April. Consider treating these costs as 2020-21 expenses.

2. Make sure you reconcile and clean up your files

• Consolidate bank statements, year-end income tax and sales records, along with expense and purchase records.
• Check your bank accounts to ensure they are reconciled and ensure that the balances are the same on your bank statements.
• Make a profit and loss statement in order to determine how much profits your company made annually.

3. Review data from your payroll vendor and Inland Revenue

• Review the information you have taken during EOFY to review the current financial position of your business.
• Ask your payroll vendor to submit EOFY data as soon as you can to allow it to be analysed.
• Access Inland Revenue information, including PAYE tax obligations as well as any KiwiSaver requirements for the employees.

4. Manage your superannuation

• Change your employer’s superannuation tax (ESCT) rates*, with the rate varying for each employee based on their salary and the length of their tenure.
• File electronically, as mandated, if your business pays $50,000 or more a year in ESCT tax and PAYE tax.

*For KiwiSaver, businesses need to pay ESCT for compulsory employers’ contributions of 3 percent, but not on contributions taken from employee wages.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, along with expenses for improvements or maintenance for claiming any EOFY refunds.
• Take into consideration disposing of stocks that are no longer in use since provisions for obsolete stock or write-downs on stock aren’t typically allowed as tax deductions.
• You should consider making your payments within 63-days after 31 March in order to claim the benefit of a deduction for expenses related to employees such as bonuses, holiday pay, or long-service leaves.
• If your income is significantly greater than the previous year, you may want to consider an additional provisional tax payment to align your tax payments with your turnover.

6. Maintain personal and financial finances distinct

You generally don’t get tax deductions on personal expenses. If it’s only your business expenses. You could be incurring unnecessary compliance costs if your accountant has to split up what’s tax deductible and the rest of it.

Tax dates for 2021 are important.

• 9 Feb 2021 Tax on income for 2020 due for taxpayers who don’t have a tax professional.
• 1 March 2021 - GST return due and payment due for the end of January for those who file their GST returns every two months.
• 31 March 2021 2021 – 2020 tax return due for tax professionals (with an extended the deadline).
• 1 April 2021 - the new financial year begins on the island of New Zealand.
• 7 May 2021 - final proviso tax instalment due for the fiscal year 2020 and last chance to make provisional tax payments.
• 7 May 2021 Tax return for the year’s end and payment due.

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