Key dates and tips to help small businesses get ready for EOFY

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

Smaller companies, like restaurants or retail stores, it’s especially important to monitor stock levels when the close of the financial year is near.

If you go to your accountant but aren’t able to recall the stock levels you had just a few months ago it can cause problems.

A good reminder for smaller business owners is that a temporary increase in the immediate asset write-off period during COVID-19 from $500 to $5,000 – is set to be lowered back to $1,000 as of 17 March 2021.

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

3 significant changes for 2021

Here are some other important tax-related changes that took place recently or are on the agenda for 2021.

1. Don’t forget that your minimum wage is set to increase by $1.10 increasing it to $18.90 to $20 an hour from April 1 2021. This could affect your financial records and superannuation payouts.
2. A new personal tax rate will be applied on income above $180,000. The new tax rate will be in effect beginning on April 1, 2021. Tachibana believes this is likely to impact those who make a living from personal service, rather than those who hold the shares and make capital gains.
3. Take note that ACC Earners’ levy, which helps cover the costs related to injuries sustained by employees, will remain at its present levels until 2022 to help businesses deal with the financial burdens of COVID-19. In January 2021, the levy stood at $1.39 for every $100 (1.39 percent).

The building blocks for EOFY achievement

Here are some advice and dates from experts that small business owners might want to keep in mind as they get their home ready for tax time.

1. Finalise your accounts

• Make sure you approve the bills, invoices and expense claims.
• Monitor accounts that are due as well as 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 so that they can be counted as an end-of-year deduction.
• Note clients or suppliers who invoiced you on 31 March or earlier but will not be due until the end of April. Take these costs into consideration as 2020-21 costs.

2. Make sure you reconcile and clean up your files

• Bank statements should be consolidated, income tax year-end documents, as well as sales, expense, and purchase records.
• Reconcile your bank accounts , and check they match the balances from your bank statement.
• Prepare your profit-and-loss statement to determine the amount of annual revenue your business has earned.

3. Review data from your payroll company and Inland Revenue

• Assess information taken during EOFY to evaluate the current financial condition of your company.
• Request your payroll provider to submit EOFY data in the earliest time possible so that it can be reviewed.
• Access Inland Revenue records, including PAYE tax obligations and KiwiSaver obligations for employees.

4. Superannuation management

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the tax rate differing for each employee based on their income and length of their tenure.
• Filing electronically, as required when your business is paying $50k or more in ESCT and PAYE taxes.

*For KiwiSaver companies, they must pay ESCT for compulsory employers’ contributions of 3 percent but not on contributions taken from the employee’s wages.

5. Maximise your tax refunds

• Log expenses and asset purchases in the course of the year, and spending on repairs or maintenance in order to claim any refunds from EOFY.
• Think about disposing of stock that is no longer needed since provisions for obsolete stock or stock write-downs aren’t usually tax-deductible.
• It is recommended to pay within 63 days after 31 March in order to claim a deduction for employee-related expenses such as holiday pay, bonuses and long-service leave.
• If your earnings are significantly greater than the previous year, consider making an additional provisional tax payment to align your tax payments with your turnover.

6. Make sure that personal and business finances are separate

There aren’t any tax deductions for personal expenses; you only get deductions for business expenses, you could be adding unnecessary compliance costs if your accountant has to determine what tax-deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 - 2020 income tax due for those who don’t have a tax representative.
• 1 March 2021 - GST return and payment due at the end of January for those who file their GST returns every two months.
• 31 March 2021 2020 income tax return due for tax agents (with a valid extension of time).
• 1. April, 2021 - the new financial year begins in New Zealand.
• 7 May 2021 Final installment of the tax proviso for the fiscal year 2020 and the final opportunity to make provisional tax payments.
• 7 May 2021 End-of-year GST return and payment due.

Notice: Some dates may differ from the deadline, such as when the due date falls on a weekend or public holiday.