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

Utilizing intuitive accounting software and cloud storage options like Google Drive or Dropbox – in addition to tenancy administration software such as myRent.co.nz - could save businesses time.

For small businesses such as retailers or restaurants, it’s especially important to monitor stock levels when the time for the end of the fiscal year draws near.

If you go to your accountant but aren’t able to recall the levels of your stocks from just a few months ago and you’re having trouble remembering, it’s a problem.

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

It’s a change that could have a big impact on small-scale companies.

Three important changes to 2021

These are just a few of the important tax-related changes that took place recently or are in the works for 2021.

1. Remember that the minimum wage is set to increase by $1.10, taking it between $18.90 to $20 an hour on April 1, 2021. This could impact your financial records as well as superannuation payment.
2. A new personal tax rate is set to apply to incomes of more than $180,000. The new tax rate is effective beginning on April 1, 2021. Tachibana claims that it is more likely to be a problem for those who earn income from providing 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, which funds the costs of injuries suffered by employees will remain at the level until 2022 in order to assist businesses in coping with the financial burdens of COVID-19. As at January 2021, the levy stood at $1.39 for every $100 (1.39 percent).

The fundamental elements of EOFY the success of EOFY

Here are some important tips and dates from experts that small-business owners may need to be aware of to ensure their house is ready for tax time.

1. Finalise your accounts

• Check and approve your invoices, bills and expense claims.
• Follow up overdue accounts and outstanding transactions to gain a view of the year’s total.
• Review debtors as at 31 March. Consider writing off any bad debts so they are considered an expense at the end of the year.
• List suppliers or clients who’ve paid you invoices on the 31st of March or earlier but will not be invoiced until April. You might want to consider treating these costs as 2020-21 costs.

2. Clean up and reconcile your files

• Combine bank accounts, income tax year-end records, plus sales, expenses, and purchase records.
• Reconcile your bank accounts and verify that they are in line with the balances on your bank statements.
• Create a profit and loss account to determine the amount of annual profit your business made.

3. Re-read the information you receive from your payroll company and Inland Revenue

• Examine the data collected during EOFY to review the current financial health of your business.
• Get your payroll company to provide EOFY data when you can, to allow it to be analysed.
• Access Inland Revenue records, including PAYE tax obligations, as well as KiwiSaver duties for staff.

4. Manage your superannuation

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the rates dependent on their income and length of employment.
• Electronically file, as required by law, if your company pays at least $50,000 in ESCT tax and PAYE tax.

*For KiwiSaver businesses, they have to pay ESCT for compulsory contribution from employers of up to 3 per cent but not on contributions taken out of wage payments to employees.

5. Maximise your tax refunds

• Log expenses and asset purchases during the year, plus expenses for improvements or maintenance, to claim any refunds from EOFY.
• Think about disposing of stock that is no longer needed since provisions for obsolete stock or write-downs on stock aren’t typically tax-deductible.
• Consider making payments within 63-days after 31 March to obtain an employee-related expense deduction such as bonuses, holiday pay, or long-service leave.
• If your income is higher than what you earned last year, consider making an additional voluntary provisional tax payment to make sure your tax payments are aligned with your turnover.

6. Maintain personal and financial finances separated

You generally don’t get tax deductions for personal expenses. it’s only your business expenses, you could be racking up unnecessary compliance costs in the event that your accountant needs to split up what’s 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 by January for companies that file every two months.
• 30 March 2021 2021 – 2020 tax return due for tax agents (with an extended time).
• 1 April 2021 The new fiscal year starts with New Zealand.
• 7 May 2021 - final provisional tax instalment due for the financial year 2020 and the final opportunity to make provisional tax payments.
• 7 May 2021 GST tax return at the end of the year and due payment.

Notice: Some dates may differ from the deadline, such as when the due date falls on a holiday weekend or public holiday.