Important dates and tips to help small businesses prepare for EOFY

The use of intuitive accounting software and cloud storage such as Google Drive or Dropbox – and tenancy management software such as myRent.co.nz can save businesses time.

For smaller businesses like restaurants or retail stores it is crucial to track stock levels as the closing date of the financial year draws near.

If you visit your accountant and are unable to remember your stock level from a couple of months ago it can cause 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 increased back to $1,000 starting 17 March 2021.

This change will be a major impact on small-scale companies.

Three significant changes are coming in 2021.

These are just a few of the important tax-related tax changes which have occurred recently or are on the agenda for 2021.

1. Do not forget that the minimum wage will rise by $1.10 to increase it between $18.90 to $20 per hour starting on April 1 2021. It could affect your financial records and superannuation payment.
2. A new 39% personal tax rate will be imposed for incomes above $180,000. The new tax rate will be in effect from April 1, 2021. Tachibana claims that this will more likely impact those who make a living from personal service, instead of those who own investments and earn capital gains.
3. Take note that ACC Earners’ levy, that helps pay for the expenses that are incurred by injuries to employees, will remain at present levels until 2022 to help businesses cope the financial burdens of COVID-19. In January 2021, the levy sits at $1.39 each $100 (1.39%).

The foundational elements for EOFY successful EOFY

Here are some key advice and dates from experts that small business owners might need to be aware of when getting their house ready for tax time.

1. Finalise your accounts

• Examine and approve your invoices, bills and expense claims.
• Check overdue accounts as well as outstanding transactions to get an overview of the year in its entirety.
• Re-evaluate debtors on 31 March and consider eliminating any outstanding debts so that they can be counted as an end-of-year deduction.
• Include clients or suppliers that have paid you invoices on the 31st of March or before but aren’t reimbursed till after April. Consider treating these costs as 2020-21 expenses.

2. Make sure you reconcile and clean up your files

• Combine bank accounts, year-end income tax records, sales, expenses, and purchase records.
• Reconcile your bank accounts and ensure that the balances are the same on your bank statements.
• Prepare your profit-and-loss statement to work out how much annual revenue your business has earned.

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

• Assess information that you have collected during EOFY to evaluate the financial situation of your business.
• Contact your payroll provider to submit EOFY data as soon as you can so that it can be analyzed.
• Access Inland Revenue documents, including PAYE tax obligations, as well as KiwiSaver obligation for workers.

4. Manage your superannuation

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the rate different for each employee depending on their income and length of tenure.
• Electronically file, as required by law, if your company pays at least $50,000 in ESCT tax and PAYE tax.

*For KiwiSaver businesses, they need to pay ESCT on contribution from employers of up to 3 per cent, but not on contributions deducted from the wages of employees.

5. Maximise your tax refunds

• Record all expenses and purchases of assets throughout the year, as well as spending on repairs or maintenance in order to claim any EOFY refunds.
• Think about disposing of stock that is no longer needed, as provisions for obsolete stock or write-downs on stock aren’t typically tax-deductible.
• 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 like bonuses, holiday pay, or long-service leaves.
• If your income is significantly higher than last year, you might want to make an additional voluntary tax payment to ensure that your tax payment is aligned with your earnings.

6. Maintain personal and financial finances separate

There aren’t any tax deductions for personal expenses; only business expenses. However, you may add unnecessary compliance charges If your accountant must split up what’s tax deductible and what’s not.

Important tax dates in 2021

• 9 February 2021 2021 – 2020 tax year due for those who do not have a tax representative.
• 1 March 2021 GST return and due at the end of January for businesses that file each two months.
• 30 March 2021 - 2020 income tax return due for clients of tax professionals (with an extended time).
• 1. April, 2021 The new fiscal year starts 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 End-of-year GST return and due payment.

Notice: Some dates may be different from the official deadline, such as when the due date occurs on a weekend, or a public holiday.