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

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

Smaller businesses, such as restaurants or retail stores, it’s especially important to keep track of stock levels as the closing date of the financial year draws near.

If you visit your accountant and can’t remember the levels of your stocks from just a few months ago and you’re having trouble remembering, it’s a problem.

A good reminder for smaller entrepreneurs 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 starting 17 March 2021.

That’s a change that will be a major impact on small-scale businesses.

Three significant changes are coming in 2021.

Below are other important tax-related reforms that took place recently or are planned for 2021.

1. Don’t forget that the minimum wage will rise by $1.10, taking it up from $18.90 to $20 per hour as of 1 April 2021. This could potentially affect your financial records and superannuation payments.
2. A new 39% personal tax rate will be imposed on income above $180,000. The new rate will take effect starting on April 1st, 2021. Tachibana claims that this is likely to impact those who make a living by providing personal services rather than those who hold an investment and enjoy capital gains.
3. Make sure you are aware that ACC Earners’ levy, that covers the cost associated with employee injuries, will be kept at current levels until 2022 to help companies deal the financial burdens of COVID-19. As at January 2021, the levy sits at $1.39 each $100 (1.39 percent).

The fundamental elements of EOFY the success of EOFY

Here are some tips and dates from experts that small business owners might wish to consider to ensure their house is ready for tax time.

1. Finalise your accounts

• Check and approve your bills, invoices and expense claims.
• Check overdue accounts and outstanding transactions for an overview of the entire year.
• Examine debtors at the time of 31 March, and think about writing off any bad debts so that they can be counted as an annual deduction at the end of the year.
• List suppliers or clients who’ve invoiced you on 31 March or before but aren’t due until the end of April. Consider treating these costs as 2020-21 expenses.

2. Clean up and reconcile your records

• Bank statements should be consolidated, tax year-end statements, records, sales, expense, and purchase records.
• Reconcile your bank accounts , and ensure that the balances are the same from your bank statement.
• Prepare your profit and loss statement to calculate the annual revenue your business has earned.

3. Re-read the information you receive from your payroll company and Inland Revenue

• Review the information you have obtained during EOFY to assess the financial position of your business.
• Contact your payroll provider to submit EOFY data in the earliest time possible so that it can be analyzed.
• Access Inland Revenue documents, including PAYE tax obligations and KiwiSaver duties for staff.

4. Manage your superannuation

• Change your employer’s superannuation tax (ESCT) rates*, with rates dependent on their income and length of employment.
• Electronically file, as required in the event that your business pays $50,000 or more a year in PAYE tax and ESCT.

*For KiwiSaver, businesses need to pay ESCT for compulsory contribution from employers of up to 3 per cent, but not on contributions deducted from employee wages.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases throughout the year, as well as spending on repairs or maintenance for claiming any EOFY refunds.
• Consider disposing of obsolete stock, as provisions for obsolete stock or stock write-downs are not generally allowed as tax deductions.
• You should consider making your payments within 63 days of 31 March to obtain the benefit of a deduction for expenses related to employees like bonuses, holiday pay, and long-service leave.
• If your income is significantly greater than the previous year, consider making an additional tax provisional payment to make sure your tax payments are aligned with your turnover.

6. Keep business and personal finances separate

There aren’t any tax deductions for personal expenses. only business expenses, you could add unnecessary compliance charges If your accountant must separate what’s tax-deductible and the rest of it.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 2021 – 2020 tax year due for those who don’t have a tax professional.
• 1 March 2021 GST return and due at the end of January for companies that file every two months.
• 30 March 2021 - 2020 income tax return due for tax agents (with an extended the deadline).
• 1. April, 2021 The new financial year starts in New Zealand.
• 7 May 2021 - final installment of tax provisional due for the fiscal year 2020 and last chance to make voluntary provisional tax payments.
• 7 May 2021 Tax return for the year’s end and due payment.

NOTE: Some dates may be different from the official date, for example, when the due date falls on a holiday weekend or public holiday.