Key dates and advice to help small businesses prepare for EOFY

Using intuitive accounting software and cloud storage like Google Drive or Dropbox – and tenancy management software such as myRent.co.nz - could save businesses time.

Smaller businesses, such as restaurants or retailers, it’s especially important to track stock levels as the time for the end of the fiscal year draws near.

If you visit your accountant and can’t remember the levels of your stocks from the last few months it can cause problems.

A good reminder for smaller entrepreneurs is that a temporary increase of the asset write-off in an instant during COVID-19 – from $500 to $5,000 – is set to be lowered back to $1,000 beginning 17 March 2021.

This is a change that will have a big impact on small businesses.

3 important changes in 2021

These are just a few of the important tax-related reforms that occurred recently or are scheduled for 2021.

1. Don’t forget that your minimum wage is set to increase by $1.10 to increase it from $18.90 to $20 per hour on April 1, 2021. This could impact your financial records as well as superannuation payment.
2. A new personal tax rate will be applied to incomes of more than $180,000. The new rate will take effect beginning on April 1, 2021. Tachibana claims that this will more likely be a problem for those who earn income from providing personal services, instead of those who own investment accounts and are able to earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, which funds the costs that are incurred by injuries to employees, will be kept at present levels until 2022 to help companies deal with the financial strains of COVID-19. As of January 20, 2021 the levy stood at $1.39 each $100 (1.39 percent).

The fundamental elements of EOFY successful EOFY

Here are some advice and dates from experts who small business owners might want to keep in mind while putting their home up and running for tax time.

1. Finalise your accounts

• Make sure you approve the 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 and consider taking any bad debts off to be considered an expense at the end of the year.
• List suppliers or clients who’ve invoiced you on 31 March or earlier but will not be invoiced until April. Take these costs into consideration as 2020-21 expenses.

2. Make sure you reconcile and clean up your records

• Incorporate bank statement statements and year-end income tax records, sales, purchase and expense records.
• Check your bank accounts to ensure they are reconciled and ensure that the balances are the same from your bank statements.
• Make a profit and loss statement in order to determine how much profits your company made annually.

3. Review data from your payroll provider and Inland Revenue

• Assess information taken during EOFY to determine the current financial position of your business.
• Ask your payroll vendor to submit EOFY data as early as possible so it can be analysed.
• Access Inland Revenue records, including PAYE tax obligations, as well as KiwiSaver requirements for the employees.

4. Superannuation management

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the rate different for each employee depending on their salary and length of service.
• File electronically, as mandated when your business is paying at least $50,000 in ESCT and PAYE taxes.

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

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases in the course of the year, and expenses for improvements or maintenance for claiming any EOFY refunds.
• Think about disposing of stock that is no longer needed, as provisions for obsolete stock or stock write-downs are not typically tax-deductible.
• Make sure to make payments within 63 calendar days following 31 March to get an allowance for employee-related expenses like bonus pay, holiday pay and long-service leave.
• If your income is significantly higher than what you earned last year, you may want to consider an additional voluntary tax payment to ensure that your tax payment is aligned to your income.

6. Keep business and personal finances distinct

Tax deductions are not usually available for personal expenses. deductions on personal expenses. If only business expenses. You could 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 Income tax for 2020 due for taxpayers who don’t have a tax agent.
• 1 March 2021 - GST return and payment due at the end of January for companies that file every two months.
• 31 March 2021 2020 income tax return due for clients of tax professionals (with a valid extension of time).
• 1 April 2021 - the new financial year begins from New Zealand.
• 7 May 2021 Final proviso tax instalment due for the financial year 2020 and last chance to make voluntary tax payments.
• 7 May 2021 Tax return for the year’s end and payment due.

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