Important dates and tips to help small businesses prepare for end of financial year

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

Smaller companies, like restaurants and retailers It’s particularly important to track stock levels as the closing date of the financial year is near.

If you go to your accountant and can’t remember your stock levels from just a few months ago and you’re having trouble remembering, it’s a problem.

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

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

3 important changes in 2021

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

1. Remember that the minimum wage is set to increase by $1.10 increasing it between $18.90 to $20 per hour as of 1 April 2021. This could potentially affect your financial records and superannuation benefits.
2. A new 39% personal tax rate will apply for incomes above $180,000. The new rate will take effect from April 1, 2021. Tachibana states that it is more likely to affect those who earn a living through personal services, rather than those who hold investments and earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, that helps pay for the expenses associated with employee injuries, will remain at the their current levels until 2022, to help businesses deal with the financial strains of COVID-19. At the time of January 2021 the levy sits at $1.39 100 cents (1.39 percent).

The foundational elements for EOFY successful EOFY

Here are some advice and dates from experts who small business owners might be able to remember as they get their home up and running for tax time.

1. Finalise your accounts

• Make sure you approve the bills, invoices and expense claims.
• Review accounts with a late payment as well as outstanding transactions to get an overview of the entire year.
• Review the debtors’ accounts as of 31 March and consider the possibility of writing off any bad debts so that they can be counted as an annual deduction at the end of the year.
• List suppliers or clients who’ve invoiced you by 31 March or earlier, but who won’t be reimbursed till after April. Think about treating these expenses as 2020-21 costs.

2. Clean up and reconcile your records

• Combine bank accounts, income tax year-end and sales records, along with expense and purchase records.
• Reconcile your bank accounts and ensure that the balances are the same on your bank statements.
• Make a profit and loss statement in order to determine how much annual profit your business made.

3. Review data from your payroll provider and Inland Revenue

• Check the information collected during EOFY to determine the current financial condition of your company.
• Request your payroll provider to send EOFY details when you can, so that it can be reviewed.
• Access to Inland Revenue records, including PAYE tax obligations, as well as KiwiSaver obligation for workers.

4. Manage superannuation

• 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 tenure.
• You must file electronically, in accordance with the mandate in the event that your business pays more than $50,000 per year in PAYE tax and ESCT.

*For KiwiSaver businesses, they need to pay ESCT on compulsory employee contributions up to 3% but not on contributions that are deducted from the employee’s wages.

5. Maximise your tax refunds

• Log expenses and asset purchases throughout the year, as well as expenses for improvements or maintenance for claiming any refunds from EOFY.
• Think about disposing of stock that is no longer needed because provisions for the disposal of obsolete stock or write-downs on stock aren’t typically tax-deductible.
• It is recommended to pay within 63 calendar days following 31 March to obtain a deduction for employee-related expenses such as bonus pay, holiday pay and long-service leave.
• If your income is substantially higher than last year, you may want to consider an additional tax provisional payment to align your tax payments with your earnings.

6. Maintain personal and financial finances distinct

It is not common to get tax deductions for personal expenses; it’s just business expenses, you could be incurring unnecessary compliance costs if your accountant has to divide what is tax-deductible and what’s not.

Tax dates for 2021 are important.

• 9 February 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 January for businesses that file each two months.
• The deadline for filing is 31 March - 2020 income tax return due for tax professionals (with an effective extension of the deadline).
• 1. April, 2021 The new fiscal year begins from New Zealand.
• 7 May 2021 - final provisional tax instalment due for the fiscal year 2020 and the last opportunity to make voluntary tax payments.
• 7 May 2021 GST tax return at the end of the year and payment due.

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