Important dates and tips to help small businesses prepare for end of financial year

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

Smaller businesses, such as restaurants or retailers it is crucial to monitor stock levels when the end of financial year is near.

If you visit your accountant and are unable to remember the stock levels you had the last few months this can lead to 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 from 17 March 2021.

It’s a change that could have a big impact on small businesses.

3 significant changes for 2021

Here are some additional important tax-related reforms that took place recently or are in the works for 2021.

1. Don’t forget that your minimum wage will increase by $1.10 increasing it up from $18.90 to $20 an hour from April 1 2021. It could affect your financial records as well as superannuation payments.
2. A new personal tax rate is set to apply to incomes of more than $180,000. The new tax rate is effective beginning on April 1, 2021. Tachibana believes this will more likely be a problem for those who earn income by providing personal services instead of those who own an investment and enjoy capital gains.
3. Take note that ACC Earners’ levy, that covers the cost that are incurred by injuries to employees, will remain at level until 2022 in order to help businesses deal with the financial strains of COVID-19. As of January 20, 2021 the levy sits at $1.39 per $100 (1.39 percent).

The fundamental elements of EOFY achievement

Here are some helpful guidelines and dates from professionals that small-business owners may be able to remember as they get their home in order for tax time.

1. Finalise your accounts

• Examine and approve your bills, invoices and expense claims.
• Review accounts with a late payment and outstanding transactions for an overview of the entire year.
• Re-evaluate debtors on 31 March. You may also consider eliminating any outstanding debts so they are considered an end-of-year deduction.
• You should list clients or suppliers who have been invoiced on or before 31 March or before but will not be reimbursed till after April. Consider treating these costs as 2020-21 costs.

2. Clean up and reconcile your files

• Consolidate bank statements, tax year-end statements, records, plus sales, expenses, and purchase records.
• Check your bank accounts to ensure they are reconciled and check they match the balances from your bank statement.
• Prepare your profit and loss statement to calculate the profits your company made annually.

3. Re-read the information you receive from your payroll vendor as well as Inland Revenue

• Examine the data obtained during EOFY to assess the current financial condition of your company.
• Ask your payroll vendor to submit EOFY data as soon as you can so that it can be analyzed.
• Access to Inland Revenue records, which include PAYE tax responsibilities and any KiwiSaver duties for staff.

4. Manage your superannuation

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with rates dependent on their income and length of tenure.
• Filing electronically, as required by law, if your company pays more than $50,000 per year in PAYE tax and ESCT.

*For KiwiSaver businesses, they need to pay ESCT on mandatory employee contributions up to 3% but not on contributions deducted from employee wages.

5. Maximise your tax refunds

• Track expenses and asset purchases throughout the year, as well as spending on repairs or maintenance to claim any EOFY refunds.
• You should consider disposing of old stock because provisions for the disposal of obsolete stock or stock write-downs are not generally allowed as tax deductions.
• Consider making payments within 63 days of 31 March, to receive the benefit of a deduction for expenses related to employees like holiday pay, bonuses and long-service leaves.
• If your income is significantly higher than last year, you may want to consider an additional voluntary tax payment to align your tax payments with your earnings.

6. Keep business and personal finances distinct

You generally don’t get tax deductions for personal expenses. it’s only your company expenses. But you might be incurring unnecessary compliance costs if your accountant has to separate what’s tax-deductible and the rest of it.

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 - 2020 income tax due for those who don’t have a tax professional.
• 1 March 2021 - GST return and payment due at the end of January for businesses that file each two months.
• 31 March 2021 - 2020 income tax return due for tax professionals (with an effective extension of time).
• 1 April 2021 the start of the new financial year begins on the island of New Zealand.
• 7 May 2021 - final provisional tax instalment due for the financial year 2020 and the final opportunity to make voluntary tax payments.
• 7 May 2021 End-of-year GST return and due payment.

NOTE: Some dates may differ from the official deadline, for example when the due date occurs on a weekend, or a public holiday.