Important dates and tips to help small businesses get ready for EOFY
The use of intuitive accounting software and cloud storage services like Google Drive or Dropbox – in addition to tenancy administration software like myRent.co.nz - could save businesses time.
Smaller businesses, such as restaurants or retail stores It’s particularly important to track stock levels as the time for the end of the fiscal year looms.
If you go to your accountant but aren’t able to recall your stock levels from a couple of months ago and you’re having trouble remembering, it’s a problem.
A great 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 starting 17 March 2021.
This change will affect a lot of small-scale enterprises.
Three important changes to 2021
Below are other important tax-related changes that occurred recently or are on the agenda for 2021.
- Remember that the minimum wage will rise by $1.10 increasing it between $18.90 to $20 an hour on April 1, 2021. This could potentially affect your financial records as well as superannuation payment.
- A new 39% personal tax rate is set to apply on earnings of greater than $180,000. The new tax rate is effective beginning on April 1, 2021. Tachibana claims that it is more likely to affect those who earn income from personal service, as opposed to those who have the shares and make capital gains.
- Take note that ACC Earners’ levy, that helps pay for the expenses of injuries suffered by employees will remain at the level until 2022 in order to help businesses deal with the financial strains of COVID-19. As of January 20, 2021 the levy is $1.39 each $100 (1.39 percent).
The essential elements to EOFY the success of EOFY
Here are some helpful tips and dates from experts which small-business owners might wish to consider as they get their home up and running for tax time.
1. Finalise your accounts
- Review and approve your bills, invoices and expense claims.
- Monitor accounts that are due and outstanding transactions to gain an overview of the year’s total.
- Re-evaluate debtors on 31 March. Consider the possibility of writing off any bad debts so they are considered an end-of-year deduction.
- You should list clients or suppliers who have invoiced you on 31 March or before, but who won’t be invoiced until April. Think about treating these expenses as expenses for 2020-21.
2. Clean up and reconcile your files
- Incorporate bank statement statements and year-end income tax records, plus sales, expenses, and purchase records.
- Reconcile your bank accounts , and ensure that the balances are the same from your bank statement.
- Create a profit and loss account to determine the amount of annual profits your business earned.
3. Check the data you received from your payroll company and Inland Revenue
- Review the information you have obtained during EOFY to review the financial condition of your company.
- Ask your payroll vendor to submit EOFY data when you can, so that it can be analyzed.
- Access to Inland Revenue records, which include PAYE tax obligations as well as any KiwiSaver obligation for workers.
4. Superannuation management
- Check your employer’s superannuation contributions tax (ESCT) rates*, with the rate dependent on their earnings and length of employment.
- Filing electronically, as required when your business is paying more than $50,000 per year in tax on PAYE and ESCT.
*For KiwiSaver businesses, they have to pay ESCT on contribution from employers of up to 3 per cent but not on contributions that are deducted from wage payments to employees.
5. Maximise your tax refunds
- Keep track of all expenditures and asset purchases throughout the year, as well as spending on repairs or maintenance to claim any refunds from EOFY.
- Take into consideration disposing of stocks that are no longer in use, as provisions for obsolete stock or stock write-downs are not typically tax-deductible.
- Consider making payments within 63 calendar days following 31 March to get the benefit of a deduction for expenses related to employees like bonuses, holiday pay, and long-service leave.
- If your income is greater than the previous year, you may want to consider an additional tax provisional payment to align your tax obligations with your turnover.
6. Maintain personal and financial finances separated
Tax deductions are not usually available for personal expenses. deductions for personal expenditure; you only get deductions for business expenses. However, you may add unnecessary compliance charges when your accountant is required to split up what’s tax deductible and the rest of it.
Important tax dates in 2021
- 9 February 2021 Tax on income for 2020 due for those who do not have a tax agent.
- 1 March 2021 - GST return and tax due by January for those who file their GST returns every two months.
- 31 March 2021 Tax year 2020 return due for tax professionals (with a valid extension of the deadline).
- 1. April, 2021 The new financial year begins from New Zealand.
- 7 May 2021 - final provisional tax instalment 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 payment due.
Notice: Some dates may vary from the official deadline, for example if a due date falls on a weekend or public holiday.
