Important dates and tips to help small businesses prepare for EOFY

Using intuitive accounting software and cloud storage services like Google Drive or Dropbox – in addition to tenancy administration software such as myRent.co.nz - could save businesses time.

Smaller companies, like retailers or restaurants It’s particularly important to keep track of stock levels as the time for the end of the fiscal year draws near.

If you visit your accountant but aren’t able to recall your stock level from 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 of the write-off of assets in the moment during COVID-19, from $500 to $5,000 – is set to be lowered back to $1,000 from 17 March 2021.

This is a change that will have a significant impact on small-scale companies.

3 important changes in 2021

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

1. Do not forget that the minimum wage is set to increase by $1.10 to increase it to $18.90 to $20 per hour on April 1, 2021. This could affect your financial records as well as superannuation benefits.
2. A new 39% personal tax rate will apply to incomes of more than $180,000. The new tax rate is effective starting on April 1st, 2021. Tachibana claims that this is more likely to impact those who make a living through personal services, rather than those who hold investment accounts and are able to earn capital gains.
3. Be aware that the ACC Earners’ levy, that helps pay for the expenses associated with employee injuries, will remain at the current levels until 2022 to help companies deal with the financial burdens of COVID-19. At the time of January 2021 the levy was $1.39 each $100 (1.39 percent).

The foundational elements for EOFY achievement

Here are some tips and dates from experts who small business owners might want to keep in mind while putting their home organized for tax season.

1. Finalise your accounts

• Review 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, and think about eliminating any outstanding debts in order to make them an annual deduction at the end of the year.
• You should list clients or suppliers who have invoiced you by 31 March or before but won’t be reimbursed till after April. You might want to consider treating these costs as 2020-21 expenses.

2. Make sure you reconcile and clean up your records

• Incorporate bank statement statements and income tax year-end documents, as well as sales, expense, and purchase records.
• Reconcile your bank accounts and ensure that the balances are the same from your bank statement.
• Create a profit and loss account to determine how much annual revenue your business has earned.

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

• Review the information you have that you have collected during EOFY to assess the current financial condition of your company.
• Contact your payroll provider to send EOFY details as soon as you can so that it can be analyzed.
• Access Inland Revenue information, including PAYE tax obligations, as well as 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 service.
• You must file electronically, in accordance with the mandate by law, if your company pays $50,000 or more a year in PAYE tax and ESCT.

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

5. Maximise your tax refunds

• Log expenses and asset purchases during the year, along with expenses for improvements or maintenance to claim any refunds from EOFY.
• Take into consideration disposing of stocks that are no longer in use in light of the fact that provisions for old stock or write-downs on stock aren’t typically tax-deductible.
• It is recommended to pay within 63 days after 31 March in order to claim a deduction for employee-related expenses like bonus pay, holiday pay and long-service leaves.
• If your earnings are significantly more than it was last year, think about making an additional voluntary tax payment to align your tax obligations to your income.

6. Make sure that personal and business finances are separated

Tax deductions are not usually available for personal expenses. deductions on personal expenses. If you only get deductions for business expenses. You could be adding unnecessary compliance costs If your accountant must split up what’s tax deductible and the rest of it.

Tax dates for 2021 are important.

• 9 Feb 2021 - 2020 income tax due for taxpayers who don’t have a tax professional.
• 1 March 2021 GST return and tax due at the end of January for those who file their GST returns every two months.
• 31 March 2021 2020 income tax return due for clients of tax professionals (with an effective extension of the deadline).
• 1 April 2021 the start of the new financial year starts from New Zealand.
• 7 May 2021 - final proviso tax instalment due for the 2020 financial year and last chance to make voluntary provisional tax payments.
• 7 May 2021 End-of-year GST return and payment due.

NOTE: Some dates may vary from the official deadline, for instance the due date is a weekend or public holiday.