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

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

For smaller businesses like restaurants or retailers it is crucial to monitor the stock levels in advance of the time for the end of the fiscal year approaches.

If you visit your accountant and are unable to remember your stock levels from just a few months ago it can cause problems.

A good reminder for small business owners is that a temporary increase of the asset write-off in an instant during COVID-19 – from $500 to $5,000 – will be increased back to $1,000 as of 17 March 2021.

This is a change that will be a major impact on small businesses.

3 significant changes for 2021

These are just a few of the important tax-related tax changes that occurred recently or are scheduled for 2021.

1. Don’t forget that the minimum wage will increase by $1.10, taking it to $18.90 to $20 per hour as of 1 April 2021. It could affect your financial records as well as superannuation benefits.
2. A new personal tax rate is set to apply to incomes of more than $180,000. The new rate will apply from 1 April 2021. Tachibana states that this is more likely to be a problem for those who earn income from providing personal services, instead of those who own investment accounts and are able to earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, that helps pay for the expenses that are incurred by injuries to employees, will remain at level until 2022 in order to help businesses cope with the financial strains of COVID-19. In January 2021, the levy is $1.39 per $100 (1.39 percent).

The essential elements to EOFY success

Here are some important information and dates from experts which small-business owners might be able to remember to ensure their house is up and running 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 year’s total.
• Review debtors as at 31 March and consider writing off any bad debts to be considered an expense at the end of the year.
• List suppliers or clients who’ve invoiced you by 31 March or earlier, but who won’t be reimbursed till after April. Consider treating these costs as expenses for 2020-21.

2. Make sure you reconcile and clean up your records

• Incorporate bank statement statements and tax year-end statements, documents, as well as sales, expense, and purchase records.
• Check your bank accounts to ensure they are reconciled and check they match the balances on your bank statements.
• Prepare your profit and loss statement to calculate the profits your company made annually.

3. Review data from your payroll vendor and Inland Revenue

• Examine the data taken during EOFY to determine the financial condition of your company.
• Contact your payroll provider to provide EOFY data as early as possible so that it can be analyzed.
• Access Inland Revenue documents, including PAYE tax obligations and KiwiSaver obligation for workers.

4. Manage your superannuation

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the tax rate differing for each employee based on their earnings and length of their tenure.
• File electronically, as mandated when your business is paying $50k or more in ESCT and PAYE taxes.

*For KiwiSaver businesses, they need to pay ESCT for compulsory employer contributions of 3%, but not on contributions that are deducted from the employee’s wages.

5. Maximise your tax refunds

• Track expenses and asset purchases throughout the year, as well as expenditure on improvements or upkeep to claim any refunds from EOFY.
• Take into consideration disposing of stocks that are no longer in use because provisions for the disposal of obsolete stock or write-downs on stock aren’t generally allowed as tax deductions.
• It is recommended to pay within 63-days after 31 March to obtain the benefit of a deduction for expenses related to employees such as holiday pay, bonuses and long-service leaves.
• If your earnings are significantly more than it was last year, you may want to consider an additional voluntary tax payment to align your tax payments to your income.

6. Maintain personal and financial finances separated

Tax deductions are not usually available for personal expenses. deductions for personal expenses. you only get deductions for business expenses. You could add unnecessary compliance charges when your accountant is required to split up what’s tax deductible and the rest of it.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 Tax on income for 2020 to be paid for those who don’t have a tax agent.
• 1 March 2021 GST return due and payment due by January for businesses filing every two months.
• 21 March 2020 income tax return due for clients of tax agents (with an extension valid for time).
• 1 April 2021 the start of the new financial year starts in New Zealand.
• 7 May 2021 Final installment of the tax proviso for the fiscal year 2020 and last chance to make voluntary tax payments.
• 7 May 2021 - end-of-year GST return and due payment.

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