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

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

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

If you go to your accountant and are unable to remember the stock levels you had the last few months this can lead to problems.

A useful reminder for small entrepreneurs is that a temporary boost in the instant asset write-off during COVID-19 – from $500 to $5,000 – will be increased back to $1,000 from 17 March 2021.

That’s a change that will have a significant impact on small-scale businesses.

Three important changes to 2021

These are just a few of the important tax-related reforms that took place recently or are on the agenda for 2021.

1. Do not forget that the minimum wage will increase by $1.10 to increase it to $18.90 to $20 an hour starting on April 1 2021. This could potentially affect your financial records and superannuation payments.
2. A new personal tax rate is set to apply to incomes of more than $180,000. The new rate will apply from April 1, 2021. Tachibana says it is more likely to be a problem for those who earn income from personal service, in contrast to those who hold investment accounts and are able to earn capital gains.
3. Take note that ACC Earners’ levy, that covers the cost of injuries suffered by employees will remain at its current levels until 2022 to help companies deal the financial burdens of COVID-19. At the time of January 2021 the levy was $1.39 100 cents (1.39 percent).

The fundamental elements of EOFY the success of EOFY

Here are some helpful advice and dates from experts that small business owners might wish to consider as they get their home in order for tax time.

1. Finalise your accounts

• Make sure you approve the bills, invoices and expense claims.
• Review accounts with a late payment as well as outstanding transactions to get a view of the year’s total.
• Re-evaluate debtors on 31 March and consider eliminating any outstanding debts so that they can be counted as an end-of-year deduction.
• List suppliers or clients who’ve invoiced you on 31 March or earlier but will not be reimbursed till after April. Take these costs into consideration as expenses for 2020-21.

2. Clean up and reconcile your files

• Incorporate bank statement statements and tax year-end statements, records, plus sales, expenses, and purchase records.
• Reconcile your bank accounts and make sure they are in balance with the amounts 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 vendor as well as Inland Revenue

• Review the information you have taken during EOFY to assess the financial condition of your company.
• Request your payroll provider to supply EOFY information as early as possible so it can be analysed.
• Access to Inland Revenue records, including PAYE tax obligations and KiwiSaver obligation for workers.

4. Superannuation is a key component of the financial system.

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the rate different for each employee depending on their earnings and length of service.
• Filing electronically, as required, if your business pays $50k or more in tax on PAYE and ESCT.

*For KiwiSaver companies, they must pay ESCT on mandatory employers’ contributions of 3 percent, but not on contributions deducted from wage payments to employees.

5. Maximise your tax refunds

• Record all expenses and purchases of assets throughout the year, as well as the cost of improvements 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.
• Consider making payments within 63-days after 31 March, to receive an employee-related expense deduction such as bonus pay, holiday pay and long-service leaves.
• If your income is substantially higher than last year, consider making an additional tax provisional payment to make sure your tax payments are aligned with your earnings.

6. Separate personal and business finances separate

There aren’t any tax deductions for personal expenses; it’s only your company expenses. But you might add unnecessary compliance charges If your accountant must determine what tax-deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 Tax on income for 2020 due for those who do not have a tax representative.
• 1 March 2021 - GST return due and payment due by January for those who file their GST returns every two months.
• 21 March 2021 – 2020 tax return due for tax professionals (with an extended time).
• 1. April, 2021 - the new financial year begins from 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 be different from the official deadline, such as if a due date falls on a holiday weekend or public holiday.