Important dates and tips to help small businesses get ready for end of financial year

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

Smaller businesses, such as retailers or restaurants, it’s especially important to monitor stock levels when the close of the financial year approaches.

If you visit your accountant and can’t remember your stock level from a couple of months ago, that creates difficulties.

A good reminder for small entrepreneurs is that an increase in 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 starting 17 March 2021.

This is a change that will have a big impact on small-scale enterprises.

Three important changes to 2021

Here are some other important tax-related reforms that occurred recently or are scheduled for 2021.

1. Don’t forget that your minimum wage will rise by $1.10 to increase it to $18.90 to $20 per hour from April 1 2021. It could affect your financial records as well as superannuation benefits.
2. A new personal tax rate is set to apply for incomes above $180,000. The new rate will take effect starting on April 1st, 2021. Tachibana says this will more likely affect those who earn income through personal services, in contrast to those who hold investments and earn capital gains.
3. Take note that ACC Earners’ levy, which funds the costs of injuries suffered by employees will remain at its current levels until 2022 to help businesses deal with the financial burdens of COVID-19. As at January 2021, the levy is $1.39 each $100 (1.39%).

The building blocks for EOFY the success of EOFY

Here are some important tips and dates from experts that small-business owners may be able to remember when getting their house organized for tax season.

1. Finalise your accounts

• Check and approve your invoices, bills and expense claims.
• Monitor accounts that are due and outstanding transactions to get an overview of the entire year.
• Review the debtors’ accounts as of 31 March. You may also consider the possibility of writing off any bad debts so they are considered a year-end deduction.
• Note clients or suppliers who invoiced you by 31 March or earlier but won’t be invoiced until April. Think about treating these expenses as 2020-21 costs.

2. Clean up and reconcile your records

• Combine bank accounts, tax year-end statements, and sales records, along with purchase and expense records.
• Consolidate your bank accounts and verify that they are in line with the balances from your bank statements.
• Create a profit and loss account to work out how much 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 that you have collected during EOFY to evaluate the current financial condition of your company.
• Ask your payroll vendor to submit EOFY data when you can, so that it can be analyzed.
• Access to Inland Revenue records, including PAYE tax obligations as well as any KiwiSaver obligation for workers.

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

• Update your employer superannuation contribution tax (ESCT) rates*, with the tax rate dependent on their salary and the length of service.
• Electronically file, as required in the event that your business pays at least $50,000 in PAYE tax 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

• Track expenses and asset purchases during the year, plus expenditure on improvements or upkeep for claiming any refunds from EOFY.
• Consider disposing of obsolete stock, as provisions for obsolete stock or stock write-downs are not typically allowed as tax deductions.
• Consider making payments within 63-days after 31 March in order to claim an allowance for employee-related expenses like holiday pay, bonuses and long-service leaves.
• If your income is substantially higher than what you earned last year, consider making an additional tax provisional payment to align your tax obligations with your turnover.

6. Keep business and personal finances separated

Tax deductions are not usually available for personal expenses. deductions for personal expenditure; it’s just business expenses, you could be incurring unnecessary compliance costs when your accountant is required to separate what’s tax-deductible and what’s not.

Some key 2021 tax dates

• 9 Feb 2021 - 2020 income tax 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 filing every two months.
• 31 March 2021 2020 income tax return due for tax professionals (with an extended the deadline).
• 1. April, 2021 the start of the new financial year starts from New Zealand.
• 7 May 2021 Final provisional tax instalment due for the 2020 financial year and the last opportunity to make tax provisional voluntary payments.
• 7 May 2021 GST tax return at the end of the year and payment due.

Notice: Some dates may vary from the official date, for example, if a due date falls on a holiday weekend or public holiday.