Important dates and advice to help small businesses prepare for EOFY

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

Smaller companies, like restaurants and retailers it is crucial to keep track of stock levels as the time for the end of the fiscal year is near.

If you visit your accountant but aren’t able to recall your stock levels from just a few months ago it can cause problems.

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

This change will affect a lot of small-scale enterprises.

Three important changes to 2021

Here are some additional important tax-related reforms which have occurred recently or are on the agenda for 2021.

1. Do not forget that the minimum wage will increase by $1.10 to increase it up from $18.90 to $20 per hour starting on April 1 2021. This could potentially affect your financial records as well as superannuation payment.
2. A new 39% personal tax rate will be imposed on earnings of greater than $180,000. The new tax rate will be in effect beginning on April 1, 2021. Tachibana claims that this is likely to affect those who earn income from personal service, as opposed to those who have investment accounts and are able to earn capital gains.
3. Make sure you are aware that ACC Earners’ levy, which helps cover the costs that are incurred by injuries to employees, will remain at current levels until 2022 to help businesses cope with the financial burdens of COVID-19. At the time of January 2021 the levy sits at $1.39 each $100 (1.39%).

The foundational elements for EOFY achievement

Here are some helpful tips and dates from experts that small business owners might want to keep in mind when getting their house in order for tax time.

1. Finalise your accounts

• Make sure you approve the bills, invoices and expense claims.
• Monitor accounts that are due and outstanding transactions for an overview of the year’s total.
• Review the debtors’ accounts as of 31 March and consider writing off any bad debts in order to make them a year-end deduction.
• Include clients or suppliers that have invoiced you on 31 March or earlier but will not be due until the end of April. Take these costs into consideration as 2020-21 expenses.

2. Make sure you reconcile and clean up your records

• Consolidate bank statements, income tax year-end documents, as well as sales, expense, and purchase records.
• Check your bank accounts to ensure they are reconciled and ensure that the balances are the same on your bank statements.
• Prepare your profit-and-loss statement to work out how much annual revenue your business has earned.

3. Review data from your payroll vendor and Inland Revenue

• Examine the data obtained during EOFY to determine the current financial health of your business.
• Request your payroll provider to submit EOFY data when you can, so that it can be analyzed.
• Access Inland Revenue records, which include PAYE tax responsibilities and any KiwiSaver requirements for the employees.

4. Superannuation management

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

*For KiwiSaver companies, they must pay ESCT on mandatory employer contributions of 3%, but not on contributions deducted from employee wages.

5. Maximise your tax refunds

• Record all expenses and purchases of assets throughout the year, as well as expenses for improvements or maintenance for claiming any EOFY refunds.
• Think about disposing of stock that is no longer needed because provisions for the disposal of obsolete stock or stock write-downs aren’t generally allowed as tax deductions.
• It is recommended to pay within 63 days after 31 March to get an allowance for employee-related expenses such as bonuses, holiday pay, or long-service leaves.
• If your earnings are significantly higher than what you earned last year, think about making an additional tax provisional payment to align your tax payments with your earnings.

6. Separate personal and business finances separated

Tax deductions are not usually available for personal expenses. deductions for personal expenses; only business expenses. However, you may be racking up unnecessary compliance costs If your accountant must separate what’s tax-deductible and the rest of it.

Some key 2021 tax dates

• 9 February 2021 - 2020 income tax due for those who don’t have a tax representative.
• 1 March 2021 - GST return and due by January for businesses that file each two months.
• 21 March 2021 – 2020 tax return due for tax professionals (with a valid extension of the deadline).
• 1. April, 2021 - the new financial year begins in New Zealand.
• 7 May 2021 - final proviso tax instalment due for the financial year 2020 and last chance to make provisional tax payments.
• 7 May 2021 - end-of-year GST return and payment due.

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