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

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

For small businesses such as restaurants and retailers, it’s especially important to monitor stock levels when the time for the end of the fiscal year draws near.

If you go to your accountant but aren’t able to recall your stock level from a couple of months ago, that creates difficulties.

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

This is a change that will have a significant impact on small-scale companies.

3 important changes in 2021

Here are some additional significant tax-related changes which have occurred recently or are on the agenda for 2021.

1. Don’t forget that your minimum wage will increase by $1.10 and will increase up from $18.90 to $20 per hour as of 1 April 2021. It could affect your financial records as well as superannuation payments.
2. A new personal tax rate will be applied on earnings of greater than $180,000. The new tax rate is effective from 1 April 2021. Tachibana says it is more likely to impact those who make a living from providing personal services, in contrast to those who hold investment accounts and are able to earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, which helps cover the costs of injuries suffered by employees will remain at its current levels until 2022 to assist businesses in coping the financial burdens of COVID-19. At the time of January 2021 the levy was $1.39 each $100 (1.39%).

The building blocks for EOFY success

Here are some guidelines and dates from professionals which small-business owners might want to keep in mind when getting their house organized for tax season.

1. Finalise your accounts

• Make sure you approve the invoices, bills and expense claims.
• Monitor accounts that are due and outstanding transactions for a view of the entire year.
• Re-evaluate debtors on 31 March, and think about the possibility of writing off any bad debts so they are considered an annual deduction at the end of the year.
• List suppliers or clients who’ve invoiced you by 31 March or earlier but will not be paid until after April. Take these costs into consideration as 2020-21 expenses.

2. Clean up and reconcile your records

• Combine bank accounts, year-end income tax records, plus sales, expenses, and purchase records.
• Reconcile your bank accounts and make sure they are in balance with the amounts from your bank statement.
• Make a profit and loss statement in order to determine the amount of annual profits your business earned.

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

• Review the information you have collected during EOFY to determine the current financial position of your business.
• Request your payroll provider to send EOFY details in the earliest time possible so that it can be analyzed.
• Access Inland Revenue information, including PAYE tax obligations and KiwiSaver duties for staff.

4. Manage superannuation

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the rates dependent on their salary and length of service.
• You must file electronically, in accordance with the mandate, if your business pays $50,000 or more a year in tax on PAYE and ESCT.

*For KiwiSaver businesses, they have to pay ESCT for compulsory contribution from employers of up to 3 per cent, but not on contributions taken out of employee wages.

5. Maximise your tax refunds

• Track expenses and asset purchases in the course of the year, and the cost of improvements or maintenance in order to claim any refunds from EOFY.
• Take into consideration disposing of stocks that are no longer in use since provisions for obsolete stock or stock write-downs are not generally allowed as tax deductions.
• It is recommended to pay within 63 days of 31 March to obtain a deduction for employee-related expenses such as bonuses, holiday pay, and long-service leaves.
• If your income is significantly more than it was last year, think about making an additional voluntary tax payment to align your tax payments with your earnings.

6. Separate personal and business finances separate

Tax deductions are not usually available for personal expenses. deductions for personal expenses. it’s only your business expenses. However, you may be incurring 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 - 2020 income tax to be paid for those who don’t have a tax representative.
• 1 March 2021 - GST return due and payment due by the end of January for those who file their GST returns every two months.
• 21 March Tax year 2020 return due for tax professionals (with an effective extension of time).
• 1 April 2021 the start of the new financial year starts from New Zealand.
• 7 May 2021 Final proviso tax instalment due for 2020’s fiscal year and the last opportunity to make tax provisional voluntary payments.
• 7 May 2021 - end-of-year GST return and payment due.

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