Important dates and advice to help small businesses prepare for EOFY

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

For smaller businesses like retailers or restaurants it is crucial to monitor the stock levels in advance of the closing date of the financial year is near.

If you visit your accountant and can’t remember your stock level from a couple of months ago, that creates difficulties.

A great reminder for small entrepreneurs is that an increase in the instant asset write-off during COVID-19 from $500 to $5,000 – will be scaled back to $1,000 beginning 17 March 2021.

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

3 significant changes for 2021

Below are other important tax-related tax changes that took place recently or are planned for 2021.

1. Don’t forget that the minimum wage will rise by $1.10 to increase it between $18.90 to $20 per hour as of 1 April 2021. This could impact your financial records as well as superannuation payments.
2. A new 39% personal tax rate will be applied to incomes of more than $180,000. The new rate will apply from 1 April 2021. Tachibana says this is likely to affect those who earn income from personal service, as opposed to those who have an investment and enjoy capital gains.
3. Be aware that the ACC Earners’ levy, which funds the costs associated with employee injuries, will remain at current levels until 2022 to assist businesses in coping with the financial burdens of COVID-19. In January 2021, the levy stood at $1.39 per $100 (1.39 percent).

The building blocks for EOFY the success of EOFY

Here are some information and dates from experts who small business owners might need to be aware of as they get their home organized for tax season.

1. Finalise your accounts

• Check and approve your invoices, bills and expense claims.
• Review accounts with a late payment and outstanding transactions for a view of the year’s total.
• Review the debtors’ accounts as of 31 March, and think about eliminating any outstanding debts in order to make them an end-of-year deduction.
• List suppliers or clients who’ve paid you invoices on the 31st of March or earlier, but who won’t be due until the end of April. Consider treating these costs as expenses for 2020-21.

2. Make sure you reconcile and clean up your records

• Consolidate bank statements, income tax year-end records, plus sales, expense, and purchase records.
• Reconcile your bank accounts and make sure they are in balance with the amounts on your bank statements.
• Prepare your profit and loss statement to determine the amount of annual profits your business earned.

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

• Review the information you have obtained during EOFY to determine the financial health of your business.
• Request your payroll provider to submit EOFY data in the earliest time possible so that it can be reviewed.
• Access Inland Revenue records, which include PAYE tax obligations and KiwiSaver requirements for the employees.

4. Manage superannuation

• Update your employer superannuation contribution tax (ESCT) rates*, with the rate varying for each employee based on their salary and length of employment.
• You must file electronically, in accordance with the mandate by law, if your company pays more than $50,000 per year in ESCT and PAYE taxes.

*For KiwiSaver businesses, they have to pay ESCT on employer contributions of 3%, but not on contributions taken from the employee’s wages.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases throughout the year, as well as the cost of improvements or maintenance in order to claim any EOFY refunds.
• Think about disposing of stock that is no longer needed since provisions for obsolete stock or stock write-downs are not generally allowed as tax deductions.
• Make sure to make payments within 63 days of 31 March, to receive an employee-related expense deduction like bonuses, holiday pay, and long-service leaves.
• If your income is substantially greater than the previous year, you may want to consider an additional provisional tax payment to ensure that your tax payment is aligned with your earnings.

6. Keep business and personal finances separated

Tax deductions are not usually available for personal expenses. deductions on personal expenses. If you only get deductions for company expenses. But you might be racking up unnecessary compliance costs when your accountant is required to determine what tax-deductible and the rest of it.

Important tax dates in 2021

• 9 February 2021 Income tax for 2020 to be paid for those who don’t have a tax representative.
• 1 March 2021 - GST return and due by January for businesses filing every two months.
• 31 March 2021 2021 – 2020 tax return due for clients of tax professionals (with an extended time).
• 1. April, 2021 The new fiscal year starts with New Zealand.
• 7 May 2021 Final provisional tax instalment due for the financial year 2020 and last chance to make tax provisional voluntary payments.
• 7 May 2021 GST tax return at the end of the year and due payment.

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