Key dates and advice to help small businesses prepare for EOFY

Utilizing intuitive accounting software and cloud storage such as Google Drive or Dropbox – in addition to tenancy administration 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 draws near.

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

A useful reminder for small business owners is that an increase in the write-off of assets in the moment during COVID-19 – from $500 to $5,000 – will be increased back to $1,000 from 17 March 2021.

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

3 significant changes for 2021

These are just a few of the important tax-related changes that have recently occurred or are planned for 2021.

1. Do not forget that the minimum wage will increase by $1.10, taking it between $18.90 to $20 per hour as of 1 April 2021. It could affect your financial records and superannuation payment.
2. A new 39% personal tax rate will apply on earnings of greater than $180,000. The new rate will apply beginning on April 1, 2021. Tachibana believes it is more likely to affect those who earn a living through personal services, in contrast to those who hold investment accounts and are able to earn capital gains.
3. Make sure you are aware that ACC Earners’ levy, that covers the cost that are incurred by injuries to employees, will remain at level until 2022 in order to help companies deal the financial burdens of COVID-19. At the time of January 2021 the levy stood at $1.39 100 cents (1.39 percent).

The fundamental elements of EOFY the success of EOFY

Here are some tips and dates from experts that small business owners might wish to consider as they get their home up and running for tax time.

1. Finalise your accounts

• Check and approve your invoices, bills and expense claims.
• Monitor accounts that are due and outstanding transactions for a view of the year in its entirety.
• Review debtors as at 31 March. You may also consider eliminating any outstanding debts to be considered an annual deduction at the end of the year.
• List suppliers or clients who’ve paid you invoices on the 31st of March or earlier, but who won’t be invoiced until April. Take these costs into consideration as 2020-21 expenses.

2. Make sure you reconcile and clean up your files

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

3. Review data from your payroll vendor as well as Inland Revenue

• Check the information obtained during EOFY to evaluate the current financial health of your business.
• Get your payroll company to send EOFY details when you can, so that it can be reviewed.
• Access Inland Revenue records, including PAYE tax obligations as well as any KiwiSaver obligations for employees.

4. Manage your superannuation

• Check your employer’s superannuation contributions tax (ESCT) rates*, with rates dependent on their earnings and length of their tenure.
• You must file electronically, in accordance with the mandate by law, if your company pays $50k or more in ESCT tax and PAYE tax.

*For KiwiSaver, businesses need to pay ESCT on mandatory employee contributions up to 3% but not on contributions deducted from the employee’s wages.

5. Maximise your tax refunds

• Log expenses and asset purchases throughout the year, as well as spending on repairs or maintenance to claim any EOFY refunds.
• Think about disposing of stock that is no longer needed since provisions for obsolete stock or write-downs on stock aren’t generally allowed as tax deductions.
• You should consider making your payments within 63 days of 31 March to obtain an employee-related expense deduction such as bonus pay, holiday pay and long-service leave.
• If your earnings are significantly more than it was last year, consider making an additional tax provisional payment to align your tax payments with your turnover.

6. Maintain personal and financial finances separated

Tax deductions are not usually available for personal expenses. deductions on personal expenses. If it’s only your business expenses. However, you may be adding unnecessary compliance costs if your accountant has to determine what tax-deductible and what’s not.

Important tax dates in 2021

• 9 Feb 2021 Income tax for 2020 due for those who don’t have a tax professional.
• 1 March 2021 - GST return and tax due for the end of January for businesses that file each two months.
• The deadline for filing is 31 March Tax year 2020 return due for tax professionals (with an effective extension of time).
• 1. April, 2021 The new financial year begins on the island of New Zealand.
• 7 May 2021 Final installment of tax provisional due for the fiscal year 2020 and the final opportunity to make tax provisional voluntary 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, such as the due date falls on a weekend or public holiday.