Key dates and tips to help small businesses prepare for EOFY

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

Smaller companies, like restaurants or retail stores It’s particularly important to keep track of stock levels as the close of the financial year draws near.

If you go to your accountant but aren’t able to recall the stock levels you had just a few months ago it can cause problems.

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

This change will have a big impact on small-scale companies.

Three important changes to 2021

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

1. Don’t forget that your minimum wage is set to increase by $1.10 increasing it between $18.90 to $20 per hour on April 1, 2021. It could affect your financial records as well as superannuation payments.
2. A new personal tax rate will be imposed for incomes above $180,000. The new tax rate will be in effect beginning on April 1, 2021. Tachibana claims that this is more likely to affect those who earn income from personal service, instead of those who own an investment and enjoy capital gains.
3. Take note that ACC Earners’ levy, that covers the cost related to injuries sustained by employees, will be kept at present levels until 2022 to help companies deal the financial burdens of COVID-19. As of January 20, 2021 the levy stood at $1.39 each $100 (1.39 percent).

The building blocks for EOFY achievement

Here are some helpful guidelines and dates from professionals which small-business owners might need to be aware of when getting their house up and running for tax time.

1. Finalise your accounts

• Check and approve your invoices, bills and expense claims.
• Check overdue accounts and outstanding transactions for an overview of the year in its entirety.
• Review debtors as at 31 March. Consider the possibility of writing off any bad debts so that they can be counted as a year-end deduction.
• Note clients or suppliers who invoiced you on 31 March or before, but who won’t be invoiced until April. Take these costs into consideration as expenses for 2020-21.

2. Make sure you reconcile and clean up your records

• Bank statements should be consolidated, tax year-end statements, and sales records, along with purchase and expense records.
• Reconcile your bank accounts and verify that they are in line with the balances on your bank statements.
• Create a profit and loss account to work out how much annual profits your business earned.

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

• Review the information you have obtained during EOFY to evaluate the current financial health of your business.
• Contact your payroll provider to submit EOFY data in the earliest time possible so that it can be reviewed.
• Access Inland Revenue records, including PAYE tax obligations and KiwiSaver obligation for workers.

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

• Change your employer’s superannuation tax (ESCT) rates*, with the rate differing for each employee based on their earnings and length of service.
• File electronically, as mandated in the event that your business pays $50k or more in ESCT and PAYE taxes.

*For KiwiSaver, businesses need to pay ESCT on mandatory employers’ contributions of 3 percent but not on contributions deducted from employee wages.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, plus spending on repairs or maintenance for claiming any refunds from EOFY.
• Take into consideration disposing of stocks that are no longer in use, as provisions for obsolete stock or write-downs on stock aren’t typically allowed as tax deductions.
• Make sure to make payments within 63-days after 31 March, to receive a deduction for employee-related expenses like bonuses, holiday pay, and long-service leaves.
• If your income is substantially higher than what you earned last year, think about making an additional voluntary provisional tax payment to align your tax payments to your income.

6. Make sure that personal and business finances are separated

You generally don’t get tax deductions for personal expenses. it’s only your business expenses. However, you may be incurring unnecessary compliance costs when your accountant is required to divide what is tax-deductible and what’s not.

Important tax dates in 2021

• 9 February 2021 Tax on income for 2020 due for taxpayers who don’t have a tax advisor.
• 1 March 2021 GST return and tax due for the end of January for those who file their GST returns every two months.
• The deadline for filing is 31 March - 2020 income tax return due for tax agents (with an extended time).
• 1. April, 2021 The new fiscal year begins on the island of 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 payment due.

Note: Some dates may differ from the deadline, for example when a due date is a weekend or public holiday.