Key dates and advice to help small businesses get ready for EOFY

Using intuitive accounting software and cloud storage options like Google Drive or Dropbox – in addition to tenancy administration software like myRent.co.nz and myRent.co.nz – can help businesses save time.

Smaller businesses, such as restaurants and retailers It’s crucial to track stock levels as the close of the financial year draws near.

If you visit your accountant and can’t remember your stock level from just a few months ago it can cause problems.

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

That’s a change that will affect a lot of small businesses.

Three important changes to 2021

Below are other important tax-related changes that took place recently or are scheduled for 2021.

1. Remember that the minimum wage will rise by $1.10 increasing it up from $18.90 to $20 per hour on April 1, 2021. It could affect your financial records as well as superannuation payouts.
2. A new 39% personal tax rate will be imposed to incomes of more than $180,000. The new rate will take effect beginning on April 1, 2021. Tachibana says this will more likely be a problem for those who earn income by providing personal services rather than those who hold investment accounts and are able to earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, that helps pay for the expenses of injuries suffered by employees will be kept at current levels until 2022 to assist businesses in coping with the financial pressures of COVID-19. In January 2021, the levy is $1.39 per $100 (1.39 percent).

The essential elements to EOFY successful EOFY

Here are some helpful tips and dates from experts who small business owners might be able to remember while putting their home up and running 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 to get an overview of the year’s total.
• Review debtors as at 31 March and consider writing off any bad debts in order to make them a year-end deduction.
• You should list clients or suppliers who have paid you invoices on the 31st of March or earlier but aren’t reimbursed till after April. You might want to consider treating these costs 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, expense, and purchase records.
• Reconcile your bank accounts and ensure that the balances are the same from your bank statements.
• Make a profit and loss statement in order to determine how much annual revenue your business has earned.

3. Examine the information from your payroll vendor as well as Inland Revenue

• Review the information you have collected during EOFY to assess the current financial situation of your business.
• Contact your payroll provider to submit EOFY data as soon as you can to allow it to be analysed.
• Access Inland Revenue records, including PAYE tax obligations and KiwiSaver obligations for employees.

4. Manage superannuation

• Change your employer’s superannuation tax (ESCT) rates*, with rates different for each employee depending on their salary and length of service.
• File electronically, as mandated, if your business pays $50,000 or more a year in tax on PAYE and ESCT.

*For KiwiSaver, businesses need to pay ESCT on employer contributions of 3% but not on contributions that are 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, to claim any refunds from EOFY.
• Take into consideration disposing of stocks that are no longer in use in light of the fact that provisions for old stock or stock write-downs are not typically tax-deductible.
• Make sure to make payments within 63 days after 31 March to get a deduction for employee-related expenses like bonus pay, holiday pay and long-service leave.
• If your income is higher than what you earned last year, you may want to consider an additional tax provisional payment to make sure your tax payments are aligned with your turnover.

6. Make sure that personal and business finances are distinct

There aren’t any tax deductions on personal expenses. If it’s only your business expenses, you could be racking up unnecessary compliance costs If your accountant must 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 taxpayers who don’t have a tax representative.
• 1 March 2021 GST return and tax due by January for companies that file every two months.
• 31 March 2021 - 2020 income tax return due for tax professionals (with an extended the deadline).
• 1 April 2021 The new fiscal year starts from New Zealand.
• 7 May 2021 Final provisional tax instalment due for the fiscal year 2020 and last chance 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 the due date falls on a holiday weekend or public holiday.