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

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

For smaller businesses like restaurants or retail stores it is crucial to monitor stock levels when the closing date of the financial year looms.

If you go to your accountant, and you are unable to recall the stock levels you had just a few months ago and you’re having trouble remembering, it’s a problem.

A good reminder for smaller business owners 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.

That’s a change that will affect a lot of small-scale enterprises.

Three important changes to 2021

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

1. Do not forget that the minimum wage will rise by $1.10 to increase it from $18.90 to $20 per hour starting on April 1 2021. This could affect your financial records and superannuation benefits.
2. A new 39% personal tax rate will apply on earnings of greater than $180,000. The new tax rate will be in effect starting on April 1st, 2021. Tachibana states that it is more likely to be a problem for those who earn income from providing personal services, as opposed to those who have the shares and make capital gains.
3. Be aware that the ACC Earners’ levy, which helps cover the costs that are incurred by injuries to employees, will remain at the level until 2022 in order to help companies deal the financial burdens of COVID-19. As at January 2021, the levy sits at $1.39 per $100 (1.39 percent).

The building blocks for EOFY success

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

1. Finalise your accounts

• Examine and approve your bills, invoices and expense claims.
• Check overdue accounts and outstanding transactions to gain an overview of the year’s total.
• Examine debtors at the time of 31 March. You may also consider taking any bad debts off to be considered a year-end deduction.
• Note clients or suppliers who invoiced you on 31 March or before but will not be due until the end of April. Think about treating these expenses as 2020-21 costs.

2. Clean up and reconcile your files

• Bank statements should be consolidated, tax year-end statements, records, sales, purchase and expense records.
• Reconcile your bank accounts and check they match the balances from your bank statements.
• Prepare your profit-and-loss statement to determine how much annual profits your business earned.

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

• Check the information that you have collected during EOFY to evaluate the current financial position of your business.
• Request your payroll provider to send EOFY details in the earliest time possible so that it can be analyzed.
• Access Inland Revenue documents, including PAYE tax responsibilities and any KiwiSaver duties for staff.

4. Superannuation is a key component of the financial system.

• Update your employer superannuation contribution tax (ESCT) rates*, with the rate dependent on their salary and the length of service.
• You must file electronically, in accordance with the mandate by law, if your company pays $50k or more in PAYE tax and ESCT.

*For KiwiSaver businesses, they have to pay ESCT on employer contributions of 3%, but not on contributions deducted from wage payments to employees.

5. Maximise your tax refunds

• Track expenses and asset purchases in the course of the year, and expenditure on improvements or upkeep to claim any EOFY refunds.
• Consider disposing of obsolete stock because provisions for the disposal of obsolete stock or stock write-downs aren’t generally allowed as tax deductions.
• It is recommended to pay within 63 calendar days following 31 March to get an allowance for employee-related expenses like bonus pay, holiday pay and long-service leaves.
• 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. Keep business and personal finances separate

There aren’t any tax deductions for personal expenditure; you only get deductions for business expenses. You could add unnecessary compliance charges when your accountant is required to determine what tax-deductible and what’s not.

Important tax dates in 2021

• 9 February 2021 Tax on income for 2020 due for those who don’t have a tax agent.
• 1 March 2021 GST return and payment due at the end of January for those who file their GST returns every two months.
• The deadline for filing is 31 March - 2020 income tax return due for tax agents (with an extension valid for the deadline).
• 1. April, 2021 The new financial year begins with New Zealand.
• 7 May 2021 - final installment of tax provisional due for 2020’s fiscal year and last chance to make voluntary tax payments.
• 7 May 2021 GST tax return at the end of the year and payment due.

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