Key dates and tips to help small businesses prepare for EOFY

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

Smaller businesses, such as restaurants and retailers It’s crucial to monitor stock levels when the close of the financial year is near.

If you visit your accountant and are unable to remember your stock levels from just a few months ago this can lead to problems.

A good reminder for small entrepreneurs is that a temporary increase of the write-off of assets in the moment during COVID-19, from $500 to $5,000 – is being scaled back to $1,000 from 17 March 2021.

It’s a change that could have a significant impact on small businesses.

Three important changes to 2021

Here are some additional important tax-related tax changes that have recently occurred or are planned for 2021.

1. Don’t forget that the minimum wage will increase by $1.10 to increase it from $18.90 to $20 per hour as of 1 April 2021. This could potentially affect your financial records as well as superannuation payment.
2. A new personal tax rate will be applied to incomes of more than $180,000. The new rate will take effect beginning on April 1, 2021. Tachibana claims that this is likely to impact those who make a living through personal services, rather than those who hold investments and earn capital gains.
3. Be aware that the ACC Earners’ levy, that helps pay for the expenses that are incurred by injuries to employees, will remain at the current levels until 2022 to assist businesses in coping the financial burdens of COVID-19. As of January 20, 2021 the levy was $1.39 for every $100 (1.39%).

The building blocks for EOFY successful EOFY

Here are some key information and dates from experts that small business owners might wish to consider while putting their home organized for tax season.

1. Finalise your accounts

• Make sure you approve the bills, invoices and expense claims.
• Check overdue accounts and outstanding transactions to gain an overview of the year in its entirety.
• Review the debtors’ accounts as of 31 March and consider taking any bad debts off so that they can be counted as an annual deduction at the end of the year.
• Include clients or suppliers that have invoiced you on 31 March or before, but who won’t 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 records

• Incorporate bank statement statements and tax year-end statements, documents, as well as sales, purchase and expense records.
• Check your bank accounts to ensure they are reconciled and make sure they are in balance with the amounts from your bank statements.
• Prepare your profit-and-loss statement to determine how much profits your company made annually.

3. Re-read the information you receive from your payroll company and Inland Revenue

• Review the information you have obtained during EOFY to determine the current financial health of your business.
• Request your payroll provider to send EOFY details as soon as you can so that it can be reviewed.
• Access to Inland Revenue documents, including PAYE tax responsibilities and any KiwiSaver obligation for workers.

4. Manage your superannuation

• Change your employer’s superannuation tax (ESCT) rates*, with rates dependent on their earnings and length of their tenure.
• File electronically, as mandated by law, if your company pays $50,000 or more a year in ESCT and PAYE taxes.

*For KiwiSaver companies, they must pay ESCT on mandatory employers’ contributions of 3 percent, but not on contributions taken out of wage payments to employees.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases during the year, plus the cost of improvements or maintenance to claim any EOFY refunds.
• Take into consideration disposing of stocks that are no longer in use because provisions for the disposal of obsolete stock or write-downs of stock are not generally allowed as tax deductions.
• Consider making payments within 63 days after 31 March, to receive an allowance for employee-related expenses such as bonuses, holiday pay, or long-service leave.
• If your earnings are significantly more than it was last year, consider making an additional voluntary tax payment to align your tax obligations with your turnover.

6. Maintain personal and financial finances separated

You generally don’t get tax deductions for personal expenses. it’s only your business expenses, you could add unnecessary compliance charges If your accountant must separate what’s tax-deductible and the rest of it.

Important tax dates in 2021

• 9 February 2021 - 2020 income tax due for taxpayers who don’t have a tax agent.
• 1 March 2021 - GST return due and payment due at the end of January for businesses filing every two months.
• 30 March 2021 2021 – 2020 tax return due for clients of tax agents (with an extended the deadline).
• 1. April, 2021 - the new financial year begins in New Zealand.
• 7 May 2021 - final installment of tax provisional due for the financial year 2020 and last chance to make voluntary tax payments.
• 7 May 2021 - end-of-year GST return and due payment.

NOTE: Some dates may differ from the deadline, for instance when the due date occurs on a weekend, or a public holiday.