Important dates and advice to help small businesses get ready for end of financial year

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

Smaller businesses, such as restaurants and retailers it is crucial to track stock levels as the close of the financial year approaches.

If you go to your accountant but aren’t able to recall your stock levels from a couple of months ago, that creates difficulties.

A great reminder for small entrepreneurs is that a temporary increase of the immediate asset write-off period during COVID-19 – from $500 up to $5,000 – will be scaled back to $1,000 beginning 17 March 2021.

This is a change that will 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 scheduled for 2021.

1. Do not forget that the minimum wage will rise by $1.10, taking it up from $18.90 to $20 per hour as of 1 April 2021. This could impact your financial records and superannuation payment.
2. A new 39% personal tax rate will be imposed to incomes of more than $180,000. The new tax rate will be in effect beginning on April 1, 2021. Tachibana believes this is likely to be a problem for those who earn income from personal service, instead of those who own the shares and make capital gains.
3. Be aware that the ACC Earners’ levy, that helps pay for the expenses associated with employee injuries, will remain at the level until 2022 in order to help businesses deal with the financial burdens of COVID-19. As at January 2021, the levy sits at $1.39 for every $100 (1.39 percent).

The fundamental elements of EOFY the success of EOFY

Here are some helpful tips and dates from experts that small business owners might be able to remember to ensure their house is ready for tax time.

1. Finalise your accounts

• Examine and approve your invoices, bills and expense claims.
• Follow up overdue accounts and outstanding transactions for an overview of the entire year.
• Review the debtors’ accounts as of 31 March. You may also consider writing off any bad debts in order to make them a year-end deduction.
• Note clients or suppliers who been invoiced on or before 31 March or earlier but won’t be invoiced until April. Take these costs into consideration as 2020-21 costs.

2. Make sure you reconcile and clean up your records

• Bank statements should be consolidated, year-end income tax records, plus sales, purchase and expense records.
• Reconcile your bank accounts and verify that they are in line with the balances from your bank statements.
• Create a profit and loss account to determine how much annual profits your business earned.

3. Examine the information from your payroll company and Inland Revenue

• Examine the data taken during EOFY to evaluate the current financial condition of your company.
• Contact your payroll provider to send EOFY details when you can, so it can be analysed.
• Access Inland Revenue records, which include PAYE tax responsibilities and any KiwiSaver requirements for the employees.

4. Manage your superannuation

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the rate differing for each employee based on their salary and the length of employment.
• Electronically file, as required in the event that your business pays $50,000 or more a year in ESCT tax and PAYE tax.

*For KiwiSaver businesses, they have to pay ESCT on compulsory contribution from employers of up to 3 per cent, but not on contributions that are deducted from the employee’s wages.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, plus spending on repairs or maintenance in order to claim any EOFY refunds.
• You should consider disposing of old stock in light of the fact that provisions for old stock or write-downs on stock aren’t typically tax-deductible.
• Make sure to make payments within 63 days after 31 March, to receive an allowance for employee-related expenses such as bonus pay, holiday pay and long-service leaves.
• If your income is greater than the previous year, you may want to consider an additional voluntary provisional tax payment to align your tax payments with your turnover.

6. Maintain personal and financial finances Separately

You generally don’t get tax deductions for personal expenses; it’s just company expenses. But you might be adding unnecessary compliance costs in the event that your accountant needs to separate what’s tax-deductible and the rest of it.

Tax dates for 2021 are important.

• 9 February 2021 Tax on income for 2020 to be paid for those who don’t have a tax professional.
• 1 March 2021 GST return and payment due by January for those who file their GST returns every two months.
• 31 March 2021 2021 – 2020 tax return due for clients of tax agents (with an effective extension of the deadline).
• 1 April 2021 The new financial year begins with New Zealand.
• 7 May 2021 Final installment of the tax proviso for the financial year 2020 and the final opportunity to make voluntary provisional tax payments.
• 7 May 2021 - end-of-year GST return and due payment.

Note: Some dates may be different from the official deadline, for instance when a due date occurs on a weekend, or a public holiday.