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

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

Smaller businesses, such as restaurants and retailers it is crucial to keep track of stock levels as the end of financial year approaches.

If you visit your accountant but aren’t able to recall the stock levels you had just a few months ago this can lead to problems.

A useful reminder for small entrepreneurs is that a temporary boost in the immediate asset write-off period during COVID-19 – from $500 to $5,000 – is being scaled back to $1,000 beginning 17 March 2021.

That’s a change that will be a major impact on small-scale companies.

3 important changes in 2021

These are just a few of the important tax-related reforms which have occurred recently or are scheduled for 2021.

1. Don’t forget that your minimum wage is set to increase by $1.10, taking it between $18.90 to $20 an hour starting on April 1 2021. This could potentially affect your financial records and superannuation payments.
2. A new 39% personal tax rate will apply for incomes above $180,000. The new tax rate is effective from 1 April 2021. Tachibana claims that this will more likely affect those who earn income from providing personal services, instead of those who own the shares and make capital gains.
3. Be aware that the ACC Earners’ levy, that helps pay for the expenses associated with employee injuries, will remain at its present levels until 2022 to help businesses deal with the financial pressures of COVID-19. At the time of January 2021 the levy sits at $1.39 for every $100 (1.39%).

The foundational elements for EOFY achievement

Here are some guidelines and dates from professionals that small-business owners may need to be aware of while putting their home organized for tax season.

1. Finalise your accounts

• Review and approve your invoices, bills and expense claims.
• Review accounts with a late payment and outstanding transactions to gain a view of the year’s total.
• Review the debtors’ accounts as of 31 March. You may also consider taking any bad debts off to be considered an end-of-year deduction.
• List suppliers or clients who’ve been invoiced on or before 31 March or earlier, but who won’t be invoiced until April. Take these costs into consideration as 2020-21 costs.

2. Make sure you reconcile and clean up your files

• Incorporate bank statement statements and year-end income tax documents, as well as sales, purchase and expense records.
• Check your bank accounts to ensure they are reconciled and check they match the balances from your bank statements.
• Prepare your profit-and-loss statement to work out how much profits your company made annually.

3. Review data from your payroll provider and Inland Revenue

• Assess information that you have collected during EOFY to review the current financial health of your business.
• Request your payroll provider to send EOFY details when you can, so that it can be reviewed.
• Access Inland Revenue records, including PAYE tax obligations and KiwiSaver duties for staff.

4. Superannuation management

• Change your employer’s superannuation tax (ESCT) rates*, with the tax rate varying for each employee based on their income and length of employment.
• Filing electronically, as required when your business is paying $50,000 or more a year in ESCT and PAYE taxes.

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

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, plus the cost of improvements or maintenance, to claim any refunds from EOFY.
• Consider disposing of obsolete stock because provisions for the disposal of obsolete stock or write-downs of stock are not generally allowed as tax deductions.
• Make sure to make payments within 63 days after 31 March to get a deduction for employee-related expenses such as holiday pay, bonuses and long-service leave.
• If your income is higher than last year, you might want to make an additional provisional tax payment to make sure your tax payments are aligned to your income.

6. Keep business and personal finances separated

You generally don’t get tax deductions for personal expenditure; you only get deductions for company expenses. But you might be adding unnecessary compliance costs in the event that your accountant needs to determine what tax-deductible and what’s not.

Some key 2021 tax dates

• 9 Feb 2021 Tax on income for 2020 due for those who do not have a tax advisor.
• 1 March 2021 GST return and tax due for the end of January for businesses filing every two months.
• 31 March 2021 Tax year 2020 return due for clients of tax professionals (with an extended the deadline).
• 1. April, 2021 the start of the new financial year begins with New Zealand.
• 7 May 2021 - final installment of the tax proviso for 2020’s fiscal year and the last opportunity to make tax provisional voluntary payments.
• 7 May 2021 Tax return for the year’s end and due payment.

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