Important dates and tips to help small businesses prepare for EOFY

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

Smaller businesses, such as restaurants or retail stores It’s crucial to monitor stock levels when the end of financial year is near.

If you go to your accountant but aren’t able to recall your stock levels from the last few months and you’re having trouble remembering, it’s a problem.

A great reminder for small business owners is that an increase in the asset write-off in an instant during COVID-19, from $500 to $5,000 – will be increased back to $1,000 beginning 17 March 2021.

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

Three significant changes are coming in 2021.

Here are some additional important tax-related tax changes that occurred recently or are in the works for 2021.

1. Do not forget that the minimum wage will increase by $1.10 to increase it between $18.90 to $20 per hour starting on April 1 2021. This could impact your financial records as well as superannuation payment.
2. A new 39% personal tax rate will apply on income above $180,000. The new rate will apply from April 1, 2021. Tachibana says this will more likely be a problem for those who earn income from providing personal services, rather than those who hold investments and earn capital gains.
3. Take note that ACC Earners’ levy, which funds the costs associated with employee injuries, will be kept at present levels until 2022 to help businesses cope with the financial strains of COVID-19. As at January 2021, the levy sits at $1.39 100 cents (1.39 percent).

The foundational elements for EOFY the success of EOFY

Here are some helpful guidelines and dates from professionals that small business owners might need to be aware of as they get their home organized for tax season.

1. Finalise your accounts

• Check and approve your invoices, bills and expense claims.
• Review accounts with a late payment as well as outstanding transactions to get an overview of the entire year.
• Review debtors as at 31 March, and think about the possibility of writing off any bad debts to be considered an expense at the end of the year.
• Include clients or suppliers that have paid you invoices on the 31st of March or before but will not be due until the end of April. Consider treating these costs as expenses for 2020-21.

2. Make sure you reconcile and clean up your records

• Incorporate bank statement statements and year-end income tax and sales records, along with expenses, and purchase records.
• Reconcile your bank accounts , and verify that they are in line with the balances on your bank statements.
• Prepare your profit and loss statement to determine how much annual profits your business earned.

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

• Check the information obtained during EOFY to assess the financial position of your business.
• Ask your payroll vendor to provide EOFY data in the earliest time possible so that it can be analyzed.
• Access Inland Revenue records, which include PAYE tax obligations, as well as KiwiSaver duties for staff.

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

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the rate different for each employee depending on their salary and the length of their tenure.
• You must file electronically, in accordance with the mandate, if your business pays $50k or more in ESCT tax and PAYE tax.

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

5. Maximise your tax refunds

• Record all expenses and purchases of assets in the course of the year, and spending on repairs or maintenance to claim any refunds from EOFY.
• Consider disposing of obsolete stock, as provisions for obsolete stock or write-downs on stock aren’t usually tax-deductible.
• Make sure to make payments within 63 calendar days following 31 March to obtain an employee-related expense deduction like holiday pay, bonuses and long-service leave.
• If your income is significantly more than it was last year, you might want to make an additional tax provisional payment to make sure your tax payments are aligned with turnover.

6. Separate personal and business finances separate

There aren’t any tax deductions on personal expenses. If it’s only your business expenses. You could be adding unnecessary compliance costs in the event that your accountant needs to split up what’s tax deductible and what’s not.

Tax dates for 2021 are important.

• 9 February 2021 Income tax for 2020 due for taxpayers who don’t have a tax agent.
• 1 March 2021 - GST return and payment due at the end of January for businesses that file each two months.
• 21 March - 2020 income tax return due for tax professionals (with an effective extension of the deadline).
• 1 April 2021 The new financial year begins with New Zealand.
• 7 May 2021 Final installment of the tax proviso for the financial year 2020 and the last opportunity to make voluntary provisional tax payments.
• 7 May 2021 Tax return for the year’s end and due payment.

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