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

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

Smaller companies, like retailers or restaurants it is crucial to monitor the stock levels in advance of the end of financial year approaches.

If you visit your accountant but aren’t able to recall the levels of your stocks from a couple of months ago and you’re having trouble remembering, it’s a problem.

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

This change will be a major impact on small-scale companies.

Three significant changes are coming in 2021.

These are just a few of the important tax-related tax changes which have occurred recently or are in the works for 2021.

1. Do not forget that the minimum wage will increase by $1.10, taking it up from $18.90 to $20 per hour as of 1 April 2021. This could impact your financial records and superannuation benefits.
2. A new 39% personal tax rate is set to apply on income above $180,000. The new tax rate is effective from April 1, 2021. Tachibana says this will more likely affect those who earn income through personal services, as opposed to those who have the shares and make capital gains.
3. Take note that ACC Earners’ levy, which funds the costs that are incurred by injuries to employees, will remain at the present levels until 2022 to help businesses deal with the financial strains of COVID-19. At the time of January 2021 the levy was $1.39 each $100 (1.39%).

The fundamental elements of EOFY success

Here are some helpful tips and dates from experts that small business owners might be able to remember as they get their home up and running for tax time.

1. Finalise your accounts

• Examine and approve your bills, invoices and expense claims.
• Monitor accounts that are due and outstanding transactions to gain a view of the year’s total.
• Review debtors as at 31 March, and think about eliminating any outstanding debts so that they can be counted as an expense at the end of the year.
• Include clients or suppliers that have invoiced you by 31 March or before but aren’t due until the end of April. You might want to consider treating these costs as expenses for 2020-21.

2. Make sure you reconcile and clean up your records

• Consolidate bank statements, year-end income tax records, plus sales, expense 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 determine the amount of profits your company made annually.

3. Check the data you received from your payroll vendor and Inland Revenue

• Assess information collected during EOFY to determine the financial health of your business.
• Request your payroll provider to supply EOFY information when you can, to allow it to be analysed.
• Access Inland Revenue records, which include PAYE tax obligations and KiwiSaver requirements for the employees.

4. Manage your superannuation

• Change your employer’s superannuation tax (ESCT) rates*, with the rates varying for each employee based on their salary and the length of employment.
• You must file electronically, in accordance with the mandate, if your business pays more than $50,000 per year in tax on PAYE and ESCT.

*For KiwiSaver, businesses need to pay ESCT for compulsory employee contributions up to 3%, but not on contributions that are deducted from wage payments to employees.

5. Maximise your tax refunds

• Log expenses and asset purchases during the year, plus expenditure on improvements or upkeep to claim any EOFY refunds.
• Think about disposing of stock that is no longer needed since provisions for obsolete stock or write-downs on stock aren’t typically allowed as tax deductions.
• You should consider making your payments within 63 days of 31 March in order to claim an allowance for employee-related expenses like bonuses, holiday pay, or long-service leave.
• If your income is substantially greater than the previous year, think about making an additional voluntary tax payment to align your tax payments with your earnings.

6. Maintain personal and financial finances separated

You generally don’t get tax deductions for personal expenditure; it’s just business expenses. However, you may be racking up unnecessary compliance costs in the event that your accountant needs to separate what’s tax-deductible and the rest of it.

Some key 2021 tax dates

• 9 Feb 2021 2021 – 2020 tax year due for those who do not have a tax professional.
• 1 March 2021 GST return and tax due by the end of January for those who file their GST returns every two months.
• 21 March Tax year 2020 return due for clients of tax professionals (with a valid extension of the deadline).
• 1. April, 2021 The new financial year starts in New Zealand.
• 7 May 2021 - final proviso tax instalment due for the fiscal year 2020 and the final opportunity to make tax provisional voluntary payments.
• 7 May 2021 Tax return for the year’s end and due payment.

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