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

Using intuitive accounting software and cloud storage services like Google Drive or Dropbox – and tenancy management software such as myRent.co.nz - could save businesses time.

For small businesses such as restaurants or retail stores It’s crucial to track stock levels as the time for the end of the fiscal year draws near.

If you visit your accountant and are unable to remember your stock levels from a couple of months ago, that creates difficulties.

A good reminder for smaller entrepreneurs 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 from 17 March 2021.

This change will affect a lot of small-scale businesses.

3 significant changes for 2021

Below are other important tax-related changes which have occurred recently or are scheduled for 2021.

1. Remember that the minimum wage will increase by $1.10 to increase it up from $18.90 to $20 an hour on April 1, 2021. This could impact your financial records as well as superannuation payment.
2. A new personal tax rate will be imposed on income above $180,000. The new tax rate will be in effect starting on April 1st, 2021. Tachibana states that it is more likely to affect those who earn income through personal services, as opposed to those who have the shares and make capital gains.
3. Make sure you are aware that ACC Earners’ levy, which helps cover the costs associated with employee injuries, will remain at its present levels until 2022 to help companies deal the financial burdens of COVID-19. As of January 20, 2021 the levy is $1.39 each $100 (1.39%).

The essential elements to EOFY successful EOFY

Here are some tips and dates from experts that small-business owners may wish to consider while putting their home in order for tax time.

1. Finalise your accounts

• Make sure you approve the invoices, bills and expense claims.
• Review accounts with a late payment and outstanding transactions to get a view of the year’s total.
• Re-evaluate debtors on 31 March. You may also consider 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 invoiced you on 31 March or before but won’t be reimbursed till after April. You might want to consider treating these costs as 2020-21 costs.

2. Make sure you reconcile and clean up your records

• Combine bank accounts, year-end income tax and sales records, along with purchase and expense records.
• Check your bank accounts to ensure they are reconciled and ensure that the balances are the same on your bank statements.
• Prepare your profit and loss statement to work out how much annual revenue your business has earned.

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

• Check the information taken during EOFY to review the current financial health of your business.
• Ask your payroll vendor to supply EOFY information as soon as you can so that it can be analyzed.
• Access to Inland Revenue records, which include PAYE tax obligations and KiwiSaver obligation for workers.

4. Manage your superannuation

• Change your employer’s superannuation tax (ESCT) rates*, with the rate different for each employee depending on their salary and the length of their tenure.
• Filing electronically, as required by law, if your company pays more than $50,000 per year in tax on PAYE and ESCT.

*For KiwiSaver businesses, they need to pay ESCT for compulsory employer contributions of 3% but not on contributions deducted from the wages of employees.

5. Maximise your tax refunds

• Log expenses and asset purchases throughout the year, as well as expenditure on improvements or upkeep in order to claim any EOFY refunds.
• You should consider disposing of old stock because provisions for the disposal of obsolete stock or write-downs of stock are not typically tax-deductible.
• Make sure to make payments within 63 calendar days following 31 March, to receive an allowance for employee-related expenses like bonus pay, holiday pay and long-service leaves.
• If your earnings are significantly more than it was last year, consider making an additional tax provisional payment to align your tax obligations with your earnings.

6. Keep business and personal finances separate

It is not common to get tax deductions for personal expenses; only business expenses. You could be adding unnecessary compliance costs If your accountant must split up what’s tax deductible and the rest of it.

Some key 2021 tax dates

• 9 Feb 2021 Income tax for 2020 due for taxpayers who don’t have a tax representative.
• 1 March 2021 GST return and tax due by January for businesses filing every two months.
• 30 March 2021 Tax year 2020 return due for clients of tax professionals (with a valid extension of the deadline).
• 1 April 2021 the start of the new financial year starts in New Zealand.
• 7 May 2021 Final installment of tax provisional due for the financial year 2020 and the last opportunity to make voluntary tax payments.
• 7 May 2021 - end-of-year GST return and payment due.

Note: Some dates may be different from the official deadline, for instance when a due date is a weekend or public holiday.