Important dates and tips to help small businesses prepare for end of financial year
Utilizing intuitive accounting software and cloud storage services like Google Drive or Dropbox – as well as tenancy management software like myRent.co.nz can save businesses time.
Smaller businesses, such as restaurants or retailers it is crucial to keep track of stock levels as the time for the end of the fiscal year approaches.
If you go to your accountant and can’t remember the levels of your stocks from the last few months this can lead to problems.
A good reminder for small entrepreneurs is that a temporary increase in the instant asset write-off during COVID-19, from $500 to $5,000 – will be scaled back to $1,000 from 17 March 2021.
That’s a change that will have a significant impact on small-scale companies.
3 important changes in 2021
These are just a few of the important tax-related reforms that have recently occurred or are in the works for 2021.
- Do not forget that the minimum wage is set to increase by $1.10 to increase it up from $18.90 to $20 an hour as of 1 April 2021. This could impact your financial records and superannuation payouts.
- A new 39% personal tax rate will be applied for incomes above $180,000. The new rate will take effect from April 1, 2021. Tachibana says this is likely to affect those who earn income from providing personal services, rather than those who hold investment accounts and are able to earn capital gains.
- It is important to be aware of the ACC Earners’ levy, that helps pay for the expenses of injuries suffered by employees will remain at present levels until 2022 to assist businesses in coping with the financial pressures of COVID-19. At the time of January 2021 the levy stood at $1.39 per $100 (1.39 percent).
The building blocks for EOFY success
Here are some helpful tips and dates from experts which small-business owners might need to be aware of as they get their home organized for tax season.
1. Finalise your accounts
- Review and approve your bills, invoices and expense claims.
- Check overdue accounts and outstanding transactions to get a view of the entire year.
- Review the debtors’ accounts as of 31 March and consider eliminating any outstanding debts in order to make them a year-end deduction.
- Include clients or suppliers that have been invoiced on or before 31 March or earlier but won’t be paid until after April. Consider treating these costs as 2020-21 expenses.
2. Clean up and reconcile your records
- Combine bank accounts, income tax year-end and sales records, along with expenses, and purchase records.
- Check your bank accounts to ensure they are reconciled and ensure that the balances are the same from your bank statements.
- Create a profit and loss account to work out how much annual revenue your business has earned.
3. Check the data you received from your payroll vendor as well as Inland Revenue
- Review the information you have that you have collected during EOFY to assess the financial condition of your company.
- Request your payroll provider to submit EOFY data in the earliest time possible to allow it to be analysed.
- Access Inland Revenue records, including PAYE tax obligations and KiwiSaver obligations for employees.
4. Manage superannuation
- Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the rate varying for each employee based on their salary and length of employment.
- Electronically file, as required in the event that your business pays at least $50,000 in ESCT tax and PAYE tax.
*For KiwiSaver businesses, they need to pay ESCT on employer contributions of 3% but not on contributions deducted from employee wages.
5. Maximise your tax refunds
- Record all expenses and purchases of assets in the course of the year, and spending on repairs or maintenance for claiming any refunds from EOFY.
- You should consider disposing of old stock, as provisions for obsolete stock or write-downs on stock aren’t generally allowed as tax deductions.
- It is recommended to pay within 63 calendar days following 31 March to obtain a deduction for employee-related expenses like holiday pay, bonuses and long-service leaves.
- If your income is substantially higher than last year, you might want to make an additional tax provisional payment to ensure that your tax payment is aligned with your turnover.
6. Maintain personal and financial finances Separately
There aren’t any tax deductions on personal expenses. If you only get deductions for company expenses. But you might add unnecessary compliance charges when your accountant is required to separate what’s tax-deductible and what’s not.
Some key 2021 tax dates
- 9 Feb 2021 Income tax for 2020 due for those who don’t have a tax advisor.
- 1 March 2021 GST return and due for the end of January for those who file their GST returns every two months.
- 31 March 2021 - 2020 income tax return due for clients of tax professionals (with an extension valid for time).
- 1 April 2021 - the new financial year begins in New Zealand.
- 7 May 2021 Final proviso tax instalment due for the 2020 financial year and the last opportunity 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 instance when a due date falls on a weekend or public holiday.
