Key dates and tips to help small businesses prepare for EOFY

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

For smaller businesses like restaurants and retailers It’s crucial to track stock levels as the time for the end of the fiscal year looms.

If you go to your accountant and can’t remember the levels of your stocks from a couple of months ago it can cause problems.

A great reminder for small entrepreneurs is that a temporary increase in the immediate asset write-off period during COVID-19, from $500 to $5,000 – will be increased back to $1,000 as of 17 March 2021.

It’s a change that could affect a lot of small-scale businesses.

Three important changes to 2021

Below are other important tax-related reforms which have occurred recently or are planned for 2021.

1. Don’t forget that the minimum wage will increase by $1.10 and will increase to $18.90 to $20 an hour starting on April 1 2021. This could impact your financial records as well as superannuation payments.
2. A new 39% personal tax rate will apply on income above $180,000. The new rate will apply from 1 April 2021. Tachibana states that this is more likely to be a problem for those who earn income from personal service, as opposed to those who have investments and earn capital gains.
3. Take note that ACC Earners’ levy, that covers the cost that are incurred by injuries to employees, will be kept at present levels until 2022 to help businesses deal with the financial burdens of COVID-19. As at January 2021, the levy sits at $1.39 100 cents (1.39 percent).

The essential elements to EOFY successful EOFY

Here are some helpful guidelines and dates from professionals that small business owners might need to be aware of to ensure their house is in order for tax time.

1. Finalise your accounts

• Examine and approve your invoices, bills and expense claims.
• Monitor accounts that are due and outstanding transactions to get an overview of the year in its entirety.
• Review the debtors’ accounts as of 31 March. You may also consider taking any bad debts off to be considered an annual deduction at the end of the year.
• List suppliers or clients who’ve invoiced you by 31 March or before, but who won’t be reimbursed till after April. Take these costs into consideration as 2020-21 costs.

2. Make sure you reconcile and clean up your files

• Combine bank accounts, income tax year-end records, plus sales, expense, and purchase records.
• Reconcile your bank accounts , and ensure that the balances are the same from your bank statements.
• Make a profit and loss statement in order to work out how much annual profits your business earned.

3. Examine the information from your payroll vendor as well as Inland Revenue

• Review the information you have obtained during EOFY to determine the current financial condition of your company.
• Contact your payroll provider to supply EOFY information when you can, to allow it to be analysed.
• Access to Inland Revenue documents, including PAYE tax obligations, as well as KiwiSaver obligation for workers.

4. Manage superannuation

• Update your employer superannuation contribution tax (ESCT) rates*, with the rate varying for each employee based on their salary and length of employment.
• File electronically, as mandated in the event that your business pays $50,000 or more a year in PAYE tax and ESCT.

*For KiwiSaver companies, they must pay ESCT on mandatory employer contributions of 3% but not on contributions taken from the employee’s wages.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases in the course of the year, and expenditure on improvements or upkeep for claiming any refunds from EOFY.
• Consider disposing of obsolete stock in light of the fact that provisions for old stock or write-downs on stock aren’t generally allowed as tax deductions.
• Make sure to make payments within 63 calendar days following 31 March in order to claim a deduction for employee-related expenses such as bonuses, holiday pay, or long-service leave.
• If your income is more than it was last year, think about making an additional voluntary provisional tax payment to make sure your tax payments are aligned with turnover.

6. Keep business and personal finances Separately

Tax deductions are not usually available for personal expenses. deductions for personal expenditure; you only get deductions for business expenses. However, you may be adding unnecessary compliance costs when your accountant is required to determine what tax-deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 Tax on income for 2020 due for taxpayers who don’t have a tax professional.
• 1 March 2021 GST return due and payment due by 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 clients of tax professionals (with an extension valid for the deadline).
• 1. April, 2021 The new fiscal year begins on the island of New Zealand.
• 7 May 2021 Final provisional tax instalment due for the 2020 financial year and the final opportunity to make tax provisional voluntary payments.
• 7 May 2021 GST tax return at the end of the year and due payment.

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