Important dates and advice to help small businesses prepare for EOFY

Utilizing intuitive accounting software as well as cloud storage services like Google Drive or Dropbox – along with tenancy management software like myRent.co.nz - could save businesses time.

Smaller businesses, such as restaurants or retail stores it is crucial to monitor the stock levels in advance of the closing date of the financial year approaches.

If you visit your accountant but aren’t able to recall the stock levels you had the last few months 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 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.

Three important changes to 2021

Here are some additional important tax-related tax changes which have occurred recently or are planned for 2021.

1. Do not forget that the minimum wage will rise by $1.10 increasing it to $18.90 to $20 an hour on April 1, 2021. This could potentially affect your financial records and superannuation benefits.
2. A new 39% personal tax rate is set to apply for incomes above $180,000. The new rate will take effect from 1 April 2021. Tachibana claims that this is likely to impact those who make a living through personal services, as opposed to those who have investments and earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, that helps pay for the expenses associated with employee injuries, will remain at the current levels until 2022 to assist businesses in coping with the financial strains of COVID-19. As of January 20, 2021 the levy is $1.39 100 cents (1.39%).

The foundational elements for EOFY the success of EOFY

Here are some key advice 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.
• Check overdue accounts and outstanding transactions to get an overview of the year’s total.
• Review the debtors’ accounts as of 31 March. Consider the possibility of writing off any bad debts so that they can be counted as an expense at the end of the year.
• List suppliers or clients who’ve been invoiced on or before 31 March or before, but who won’t be paid until after April. You might want to consider treating these costs as expenses for 2020-21.

2. Make sure you reconcile and clean up your records

• Consolidate bank statements, year-end income tax and sales records, along with expense and purchase records.
• Reconcile your bank accounts , and make sure they are in balance with the amounts on your bank statements.
• Prepare your profit-and-loss statement to determine the amount of annual revenue your business has earned.

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

• Check the information that you have collected during EOFY to assess the current financial health of your business.
• Ask your payroll vendor to provide EOFY data when you can, so that it can be reviewed.
• Access to Inland Revenue documents, including PAYE tax responsibilities and any KiwiSaver obligation for workers.

4. Manage superannuation

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the rates different for each employee depending on their income and length of their tenure.
• You must file electronically, in accordance with the mandate, if your business pays $50k or more in PAYE tax and ESCT.

*For KiwiSaver, businesses need to pay ESCT on employers’ contributions of 3 percent but not on contributions taken out of wage payments to employees.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, along with expenditure on improvements or upkeep for claiming any EOFY refunds.
• Take into consideration disposing of stocks that are no longer in use since provisions for obsolete stock or write-downs of stock are not typically tax-deductible.
• It is recommended to pay within 63 days of 31 March in order to claim an allowance for employee-related expenses like bonuses, holiday pay, and long-service leaves.
• If your income is greater than the previous year, think about making an additional tax provisional payment to align your tax obligations to your income.

6. Separate personal and business finances separated

You generally don’t get tax deductions on personal expenses. If you only get deductions for company expenses. But you might be adding unnecessary compliance costs when your accountant is required to separate what’s tax-deductible and the rest of it.

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 professional.
• 1 March 2021 GST return and payment due by the end of January for companies that file every two months.
• 31 March 2021 2021 – 2020 tax return due for tax agents (with an extended the deadline).
• 1. April, 2021 The new financial year begins with New Zealand.
• 7 May 2021 - final installment of tax provisional due for the 2020 financial year and the final opportunity to make voluntary provisional tax payments.
• 7 May 2021 End-of-year GST return and due payment.

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