Key dates and advice to help small businesses prepare for end of financial year

The use of intuitive accounting software and cloud storage such as Google Drive or Dropbox – along with tenancy management software like myRent.co.nz can help save businesses time.

Smaller businesses, such as restaurants and retailers It’s crucial to monitor stock levels when the end of financial year is near.

If you visit your accountant but aren’t able to recall your stock level from a couple of months ago it can cause problems.

A good reminder for small business owners is that a temporary increase in the write-off of assets in the moment during COVID-19 from $500 to $5,000 – will be scaled back to $1,000 from 17 March 2021.

This change will be a major impact on small-scale enterprises.

3 significant changes for 2021

Here are some other important tax-related tax changes that occurred recently or are on the agenda for 2021.

1. Don’t forget that your minimum wage will increase by $1.10 to increase it from $18.90 to $20 an hour starting on April 1 2021. This could impact your financial records and superannuation payments.
2. A new 39% personal tax rate is set to apply on earnings of greater than $180,000. The new rate will take effect from 1 April 2021. Tachibana believes this is more likely to be a problem for those who earn income through personal services, rather than those who hold investment accounts and are able to earn capital gains.
3. Be aware that the ACC Earners’ levy, that covers the cost related to injuries sustained by employees, will remain at the current levels until 2022 to assist businesses in coping with the financial pressures of COVID-19. At the time of January 2021 the levy is $1.39 100 cents (1.39 percent).

The fundamental elements of EOFY successful EOFY

Here are some important information and dates from experts that small business owners might want to keep in mind as they get their home in order for tax time.

1. Finalise your accounts

• Examine and approve your bills, invoices and expense claims.
• Check overdue accounts and outstanding transactions to get an overview of the year in its entirety.
• Review the debtors’ accounts as of 31 March. Consider the possibility of writing off any bad debts in order to make them an end-of-year deduction.
• You should list clients or suppliers who have paid you invoices on the 31st of March or earlier but won’t be reimbursed till after April. Think about treating these expenses as expenses for 2020-21.

2. Make sure you reconcile and clean up your records

• Consolidate bank statements, income tax year-end documents, as well as sales, purchase and expense records.
• Reconcile your bank accounts , and ensure that the balances are the same from your bank statement.
• Prepare your profit and loss statement to work out how much annual profit your business made.

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

• Assess information obtained during EOFY to evaluate the financial condition of your company.
• Get your payroll company to submit EOFY data as soon as you can so that it can be analyzed.
• Access to Inland Revenue records, including PAYE tax obligations and KiwiSaver obligations for employees.

4. Superannuation management

• Update your employer superannuation contribution tax (ESCT) rates*, with rates varying for each employee based on their salary and length of their tenure.
• Electronically file, as required by law, if your company pays $50k or more in ESCT and PAYE taxes.

*For KiwiSaver businesses, they have to pay ESCT for compulsory employers’ contributions of 3 percent but not on contributions deducted from employee wages.

5. Maximise your tax refunds

• Track expenses and asset purchases in the course of the year, and spending on repairs or maintenance for claiming any EOFY refunds.
• You should consider disposing of old stock in light of the fact that provisions for old stock or stock write-downs aren’t usually 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, or long-service leaves.
• If your earnings are significantly higher than what you earned last year, consider making an additional tax provisional payment to align your tax obligations with your earnings.

6. Keep business and personal finances separate

There aren’t any tax deductions for personal expenses; you only get deductions for business expenses. You could be adding unnecessary compliance costs when your accountant is required to divide what is tax-deductible and what’s not.

Important tax dates in 2021

• 9 Feb 2021 2021 – 2020 tax year to be paid for those who don’t have a tax representative.
• 1 March 2021 GST return and tax due at the end of January for businesses that file each two months.
• 31 March 2021 2020 income tax return due for clients of tax professionals (with an effective extension of time).
• 1. April, 2021 The new financial year begins with New Zealand.
• 7 May 2021 Final installment of the tax proviso for the 2020 financial year and last chance to make voluntary tax payments.
• 7 May 2021 End-of-year GST return and due payment.

Notice: Some dates may differ from the official deadline, such as if a due date occurs on a weekend, or a public holiday.