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

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

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

If you go to your accountant and are unable to remember the levels of your stocks from just a few months ago this can lead to problems.

A useful reminder for small business owners is that an increase in the asset write-off in an instant during COVID-19, from $500 to $5,000 – will be increased back to $1,000 as of 17 March 2021.

This change will affect a lot of small-scale businesses.

3 significant changes for 2021

Here are some additional important tax-related reforms that occurred recently or are in the works for 2021.

1. Do not forget that the minimum wage will increase by $1.10 increasing it between $18.90 to $20 an hour as of 1 April 2021. This could potentially affect your financial records as well as superannuation payment.
2. A new 39% personal tax rate will be imposed to incomes of more than $180,000. The new rate will apply starting on April 1st, 2021. Tachibana believes this is likely to be a problem for those who earn income from providing personal services, in contrast to those who hold investments and earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, that helps pay for the expenses associated with employee injuries, will be kept at their current levels until 2022, to help businesses deal with the financial strains of COVID-19. As of January 20, 2021 the levy is $1.39 100 cents (1.39 percent).

The essential elements to EOFY success

Here are some helpful tips and dates from experts who small business owners might need to be aware of to ensure their house is ready for tax time.

1. Finalise your accounts

• Check and approve your invoices, bills and expense claims.
• Monitor accounts that are due and outstanding transactions for a view of the year’s total.
• Review the debtors’ accounts as of 31 March and consider eliminating any outstanding debts in order to make them an expense at the end of the year.
• Include clients or suppliers that have invoiced you by 31 March or earlier but aren’t invoiced until April. You might want to consider treating these costs as expenses for 2020-21.

2. Clean up and reconcile your records

• Incorporate bank statement statements and year-end income tax documents, as well as sales, purchase and expense records.
• Consolidate your bank accounts and make sure they are in balance with the amounts on your bank statements.
• Make a profit and loss statement in order to work out how much annual revenue your business has earned.

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

• Review the information you have that you have collected during EOFY to determine the current financial position of your business.
• Request your payroll provider to supply EOFY information as soon as you can so it can be analysed.
• Access Inland Revenue documents, including PAYE tax obligations, as well as KiwiSaver requirements for the employees.

4. Superannuation management

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

*For KiwiSaver companies, they must pay ESCT on mandatory employer contributions of 3% but not on contributions deducted from employee wages.

5. Maximise your tax refunds

• Log expenses and asset purchases throughout the year, as well as spending on repairs or maintenance for claiming any EOFY refunds.
• You should consider disposing of old stock because provisions for the disposal of obsolete stock or write-downs of stock are not typically tax-deductible.
• Consider making payments within 63 days after 31 March in order to claim an allowance for employee-related expenses like holiday pay, bonuses and long-service leaves.
• If your earnings are significantly more than it was last year, you may want to consider an additional voluntary provisional tax payment to make sure your tax payments are aligned to your income.

6. Keep business and personal finances separated

There aren’t any tax deductions on personal expenses. If you only get deductions for company expenses. But you might be incurring unnecessary compliance costs if your accountant has to determine what tax-deductible and the rest of it.

Some key 2021 tax dates

• 9 February 2021 - 2020 income tax to be paid for those who don’t have a tax advisor.
• 1 March 2021 GST return and due by January for companies that file every two months.
• 21 March 2021 – 2020 tax return due for tax professionals (with a valid extension of the deadline).
• 1 April 2021 The new fiscal year begins with New Zealand.
• 7 May 2021 Final installment of tax provisional due for 2020’s fiscal year and the final opportunity to make voluntary 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, when the due date falls on a holiday weekend or public holiday.