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

Using intuitive accounting software and cloud storage services like Google Drive or Dropbox – in addition to tenancy administration software like myRent.co.nz and myRent.co.nz – can help businesses save time.

Smaller businesses, such as restaurants and retailers, it’s especially important to track stock levels as the close of the financial year approaches.

If you go to your accountant and can’t 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 increase in the write-off of assets in the moment during COVID-19 – from $500 up to $5,000 – is set to be lowered back to $1,000 beginning 17 March 2021.

This is a change that will have a big impact on small businesses.

Three important changes to 2021

Below are other important tax-related tax changes that have recently occurred or are planned for 2021.

1. Don’t forget that the minimum wage will rise by $1.10 increasing it up from $18.90 to $20 per hour on April 1, 2021. This could impact your financial records and superannuation payment.
2. A new personal tax rate will apply on income above $180,000. The new tax rate is effective from April 1, 2021. Tachibana states that this is more likely to affect those who earn a living through personal services, as opposed to those who have the shares and make capital gains.
3. It is important to be aware of the ACC Earners’ levy, that covers the cost that are incurred by injuries to employees, will be kept at their current levels until 2022, to help businesses deal with the financial pressures of COVID-19. As of January 20, 2021 the levy sits at $1.39 for every $100 (1.39 percent).

The essential elements to EOFY success

Here are some tips and dates from experts that small-business owners may want to keep in mind when getting their house organized for tax season.

1. Finalise your accounts

• Review and approve your bills, invoices and expense claims.
• Monitor accounts that are due and outstanding transactions to get an overview of the year’s total.
• Review debtors as at 31 March, and think about the possibility of writing off any bad debts so that they can be counted as a year-end deduction.
• You should list clients or suppliers who have invoiced you on 31 March or earlier but won’t be due until the end of April. Take these costs into consideration as expenses for 2020-21.

2. Clean up and reconcile your files

• Consolidate bank statements, income tax year-end and sales records, along with purchase and expense records.
• Reconcile your bank accounts and check they match the balances from your bank statement.
• Create a profit and loss account to calculate the annual profit your business made.

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

• Review the information you have collected during EOFY to evaluate the current financial position of your business.
• Request your payroll provider to submit EOFY data as early as possible so that it can be reviewed.
• Access Inland Revenue documents, including PAYE tax obligations as well as any KiwiSaver obligations for employees.

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

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the rates dependent on their salary and length of their tenure.
• File electronically, as mandated by law, if your company pays $50k or more in ESCT and PAYE taxes.

*For KiwiSaver, businesses need to pay ESCT on mandatory employer contributions of 3% but not on contributions taken out of the employee’s wages.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases in the course of the year, and the cost of improvements or maintenance for claiming any EOFY refunds.
• Think about disposing of stock that is no longer needed in light of the fact that provisions for old stock or stock write-downs aren’t typically tax-deductible.
• Consider making payments within 63 calendar days following 31 March to obtain an allowance for employee-related expenses like bonuses, holiday pay, and long-service leaves.
• If your income is substantially higher than what you earned last year, you might want to make an additional voluntary provisional tax payment to ensure that your tax payment is aligned with turnover.

6. Make sure that personal and business finances are distinct

You generally don’t get tax deductions for personal expenses; it’s only your business expenses. You could add unnecessary compliance charges If your accountant must determine what tax-deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 Income tax for 2020 to be paid for those who don’t have a tax representative.
• 1 March 2021 GST return and tax due by January for those who file their GST returns every two months.
• 30 March 2021 2021 – 2020 tax return due for tax professionals (with a valid extension of the deadline).
• 1 April 2021 The new fiscal year starts on the island of New Zealand.
• 7 May 2021 - final installment of the tax proviso for the financial year 2020 and last chance to make provisional tax payments.
• 7 May 2021 GST tax return at the end of the year and due payment.

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