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

The use of intuitive accounting software and cloud storage services like Google Drive or Dropbox – along with tenancy management software such as myRent.co.nz can help save businesses time.

Smaller businesses, such as restaurants and retailers It’s particularly important to keep track of stock levels as the end of financial year looms.

If you visit your accountant and are unable to remember the stock levels you had just a few months ago and you’re having trouble remembering, it’s a problem.

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

That’s a change that will have a big impact on small-scale businesses.

3 significant changes for 2021

These are just a few of the important tax-related tax changes that occurred recently or are planned for 2021.

1. Do not forget that the minimum wage will rise by $1.10, taking it to $18.90 to $20 an hour as of 1 April 2021. This could impact your financial records as well as superannuation payment.
2. A new personal tax rate will apply to incomes of more than $180,000. The new tax rate will be in effect starting on April 1st, 2021. Tachibana believes this is likely to affect those who earn a living from personal service, as opposed to those who have the shares and make capital gains.
3. Take note that ACC Earners’ levy, which helps cover the costs of injuries suffered by employees will remain at the their current levels until 2022, to assist businesses in coping with the financial burdens of COVID-19. At the time of January 2021 the levy is $1.39 100 cents (1.39 percent).

The fundamental elements of EOFY success

Here are some key advice and dates from experts that small-business owners may need to be aware of while putting their home in order for tax time.

1. Finalise your accounts

• Examine and approve your bills, invoices and expense claims.
• Follow up overdue accounts and outstanding transactions to get an overview of the year’s total.
• Re-evaluate debtors on 31 March. Consider the possibility of writing off any bad debts so they are considered an expense at the end of the year.
• Note clients or suppliers who invoiced you on 31 March or earlier, but who won’t be due until the end of April. You might want to consider treating these costs as 2020-21 expenses.

2. Clean up and reconcile your records

• Consolidate bank statements, year-end income tax records, sales, expenses, and purchase records.
• Consolidate your bank accounts and ensure that the balances are the same from your bank statements.
• Prepare your profit-and-loss statement to determine the amount of profits your company made annually.

3. Review data from your payroll provider and Inland Revenue

• Review the information you have that you have collected during EOFY to assess the current financial situation of your business.
• Contact your payroll provider to provide EOFY data as early as possible to allow it to be analysed.
• Access Inland Revenue information, including PAYE tax obligations and KiwiSaver duties for staff.

4. Superannuation management

• Change your employer’s superannuation tax (ESCT) rates*, with the rate varying for each employee based on their earnings and length of employment.
• Filing electronically, as required, if your business pays more than $50,000 per year in ESCT and PAYE taxes.

*For KiwiSaver businesses, they have to pay ESCT on mandatory 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 expenditure on improvements or upkeep to claim any refunds from EOFY.
• You should consider disposing of old stock, as provisions for obsolete stock or stock write-downs are not typically allowed as tax deductions.
• Consider making payments within 63 days after 31 March to get an allowance for employee-related expenses such as bonuses, holiday pay, or long-service leaves.
• If your income is significantly greater than the previous year, think about making an additional voluntary provisional tax payment to ensure that your tax payment is aligned with turnover.

6. Make sure that personal and business finances are separated

There aren’t any tax deductions for personal expenses. you only get deductions for company expenses. But you might be racking up unnecessary compliance costs if your accountant has to split up what’s tax deductible and the rest of it.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 - 2020 income tax to be paid for those who don’t have a tax advisor.
• 1 March 2021 GST return and payment due for the end of January for companies that file every two months.
• The deadline for filing is 31 March 2021 – 2020 tax return due for clients of tax professionals (with an effective extension of the deadline).
• 1 April 2021 The new financial year begins on the island of New Zealand.
• 7 May 2021 Final installment of the tax proviso for the fiscal year 2020 and the last opportunity to make provisional tax payments.
• 7 May 2021 End-of-year GST return and payment due.

Note: Some dates may be different from the official date, for example, if a due date is a weekend or public holiday.