Important dates and tips to help small businesses prepare for EOFY

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

For smaller businesses like restaurants and retailers It’s particularly important to monitor stock levels when the end of financial year is near.

If you go to your accountant and are unable to remember the stock levels you had the last few months it can cause problems.

A great reminder for small business owners is that a temporary boost in the immediate asset write-off period during COVID-19 – from $500 to $5,000 – is being scaled back to $1,000 as of 17 March 2021.

This is a change that will have a significant impact on small-scale companies.

Three significant changes are coming in 2021.

Here are some additional important tax-related tax changes that have recently occurred or are in the works for 2021.

1. Remember that the minimum wage is set to increase by $1.10 to increase it to $18.90 to $20 an hour from April 1 2021. This could potentially affect your financial records as well as superannuation payment.
2. A new personal tax rate will be applied to incomes of more than $180,000. The new tax rate will be in effect from 1 April 2021. Tachibana claims that this is more likely to be a problem for those who earn income from personal service, instead of those who own investments and earn capital gains.
3. Take note that ACC Earners’ levy, that covers the cost related to injuries sustained by employees, will remain at its present levels until 2022 to help companies deal the financial burdens of COVID-19. As at January 2021, the levy stood at $1.39 per $100 (1.39%).

The foundational elements for EOFY achievement

Here are some important tips and dates from experts that small business owners might want to keep in mind while putting their home ready for tax time.

1. Finalise your accounts

• Check and approve your invoices, bills and expense claims.
• Check overdue accounts and outstanding transactions to get an overview of the year in its entirety.
• Re-evaluate debtors on 31 March. You may also consider the possibility of writing off any bad debts in order to make them a year-end deduction.
• List suppliers or clients who’ve invoiced you on 31 March or earlier, but who won’t be invoiced until April. You might want to consider treating these costs as 2020-21 costs.

2. Clean up and reconcile your records

• Incorporate bank statement statements and income tax year-end and sales records, along with expenses, and purchase records.
• Consolidate your bank accounts and check they match the balances from your bank statements.
• Prepare your profit-and-loss statement to determine how much profits your company made annually.

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

• Examine the data that you have collected during EOFY to evaluate the financial situation 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 records, including PAYE tax obligations as well as any KiwiSaver obligations for employees.

4. Superannuation management

• Update your employer superannuation contribution tax (ESCT) rates*, with the rates dependent on their earnings and length of employment.
• Electronically file, as required, if your business pays at least $50,000 in tax on PAYE and ESCT.

*For KiwiSaver businesses, they need to pay ESCT on compulsory employer contributions of 3% but not on contributions taken out of the wages of employees.

5. Maximise your tax refunds

• Track expenses and asset purchases throughout the year, as well as the cost of improvements or maintenance in order to claim any refunds from EOFY.
• Think about disposing of stock that is no longer needed, as provisions for obsolete stock or stock write-downs are not generally allowed as tax deductions.
• It is recommended to pay within 63 days after 31 March, to receive an allowance for employee-related expenses such as holiday pay, bonuses and long-service leaves.
• If your income is substantially more than it was last year, think about making an additional tax provisional payment to align your tax obligations with turnover.

6. Keep business and personal finances separate

There aren’t any tax deductions for personal expenses; only business expenses, you could be incurring unnecessary compliance costs if your accountant has to divide what is tax-deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 2021 – 2020 tax year to be paid for those who don’t have a tax agent.
• 1 March 2021 - GST return 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 agents (with an extended time).
• 1 April 2021 The new financial year starts from New Zealand.
• 7 May 2021 - final installment of the tax proviso for the 2020 financial year and the last opportunity to make tax provisional voluntary payments.
• 7 May 2021 Tax return for the year’s end and due payment.

Notice: Some dates may be different from the official date, for example, the due date is a weekend or public holiday.