Key dates and tips to help small businesses prepare for EOFY

Utilizing intuitive accounting software as well as cloud storage like Google Drive or Dropbox – in addition to tenancy administration software like myRent.co.nz and myRent.co.nz – can help businesses save time.

Smaller companies, like restaurants and retailers It’s crucial to monitor stock levels when the end of financial year looms.

If you visit your accountant and can’t remember the levels of your stocks from the last few months this can lead to problems.

A useful reminder for small entrepreneurs is that an increase in the instant asset write-off 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 have a big impact on small businesses.

Three significant changes are coming in 2021.

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

1. Don’t forget that your minimum wage will increase by $1.10, taking it between $18.90 to $20 an hour from April 1 2021. This could potentially affect your financial records and superannuation payments.
2. A new personal tax rate will apply for incomes above $180,000. The new rate will apply from April 1, 2021. Tachibana states that this is likely to impact those who make a living by providing personal services in contrast to those who hold investment accounts and are able to earn capital gains.
3. Make sure you are aware that ACC Earners’ levy, that covers the cost associated with employee injuries, will remain at the level until 2022 in order to help businesses deal with the financial strains of COVID-19. At the time of January 2021 the levy is $1.39 per $100 (1.39%).

The building blocks for EOFY the success of EOFY

Here are some information and dates from experts that small business owners might need to be aware of to ensure their house is up and running for tax time.

1. Finalise your accounts

• Examine and approve your invoices, bills and expense claims.
• Follow up overdue accounts and outstanding transactions for an overview of the entire year.
• Review debtors as at 31 March, and think about eliminating any outstanding debts so that they can be counted as a year-end deduction.
• Include clients or suppliers that have been invoiced on or before 31 March or earlier, but who won’t be invoiced until April. Think about treating these expenses as 2020-21 costs.

2. Clean up and reconcile your records

• Incorporate bank statement statements and income tax year-end records, sales, expense and purchase records.
• Check your bank accounts to ensure they are reconciled and ensure that the balances are the same from your bank statement.
• Prepare your profit-and-loss statement to calculate the profits your company made annually.

3. Examine the information from your payroll provider and Inland Revenue

• Assess information that you have collected during EOFY to determine the current financial health of your business.
• Request your payroll provider to send EOFY details as early as possible so that it can be reviewed.
• Access Inland Revenue documents, including PAYE tax obligations, as well as KiwiSaver obligations for employees.

4. Superannuation is a key component of the financial system.

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the rates different for each employee depending on their salary and the length of service.
• Electronically file, as required in the event that your business pays more than $50,000 per year in PAYE tax and ESCT.

*For KiwiSaver companies, they must pay ESCT on compulsory employer contributions of 3%, but not on contributions taken from wage payments to employees.

5. Maximise your tax refunds

• Log expenses and asset purchases during the year, plus expenses for improvements or maintenance in order to claim any EOFY refunds.
• Consider disposing of obsolete stock, as provisions for obsolete stock or stock write-downs are not typically allowed as tax deductions.
• Make sure to make payments within 63 days of 31 March to get an employee-related expense deduction such as holiday pay, bonuses and long-service leaves.
• If your income is significantly higher than what you earned last year, you might want to make an additional voluntary provisional tax payment to make sure your tax payments are aligned to your income.

6. Separate personal and business finances separate

There aren’t any tax deductions for personal expenditure; it’s just business expenses, you could be incurring unnecessary compliance costs If your accountant must separate what’s tax-deductible and what’s not.

Important tax dates in 2021

• 9 February 2021 Tax on income for 2020 to be paid for those who don’t have a tax agent.
• 1 March 2021 GST return and payment due by January for those who file their GST returns every two months.
• 30 March 2021 2021 – 2020 tax return due for tax agents (with an extension valid for time).
• 1 April 2021 - the new financial year starts from New Zealand.
• 7 May 2021 - final installment of tax provisional due for 2020’s fiscal year and the final opportunity to make voluntary tax payments.
• 7 May 2021 End-of-year GST return and payment due.

NOTE: Some dates may differ from the official date, for example, when a due date is a weekend or public holiday.