Key dates and advice to help small businesses prepare for EOFY

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

For smaller businesses like restaurants or retailers It’s particularly important to monitor the stock levels in advance of the end of financial year is near.

If you visit your accountant and can’t remember the stock levels you had a couple of months ago this can lead to problems.

A good reminder for small entrepreneurs is that a temporary boost in the write-off of assets in the moment during COVID-19 – from $500 up to $5,000 – is being scaled back to $1,000 as of 17 March 2021.

It’s a change that could have a significant impact on small-scale enterprises.

3 significant changes for 2021

These are just a few of the significant tax-related changes that occurred recently or are on the agenda for 2021.

1. Remember that the minimum wage will increase by $1.10 and will increase up from $18.90 to $20 per hour as of 1 April 2021. This could impact your financial records as well as superannuation payment.
2. A new personal tax rate will be applied for incomes above $180,000. The new tax rate will be in effect from 1 April 2021. Tachibana believes this is likely to impact those who make a living from providing personal services, instead of those who own investment accounts and are able to earn capital gains.
3. Take note that ACC Earners’ levy, that covers the cost related to injuries sustained by employees, will remain at the their current levels until 2022, to help companies deal with the financial pressures of COVID-19. As of January 20, 2021 the levy stood at $1.39 for every $100 (1.39 percent).

The fundamental elements of EOFY success

Here are some important advice and dates from experts which small-business owners might be able to remember as they get their home up and running for tax time.

1. Finalise your accounts

• Examine and approve your invoices, bills and expense claims.
• Review accounts with a late payment and outstanding transactions to get a view of the year’s total.
• Re-evaluate debtors on 31 March and consider the possibility of writing off any bad debts to be considered an end-of-year deduction.
• Include clients or suppliers that have paid you invoices on the 31st of March or earlier but will not be invoiced until April. Think about treating these expenses as 2020-21 costs.

2. Make sure you reconcile and clean up your records

• Consolidate bank statements, year-end income tax documents, as well as sales, expenses, and purchase records.
• Reconcile your bank accounts and verify that they are in line with the balances from your bank statements.
• Prepare your profit-and-loss statement to work out how much annual profit your business made.

3. Re-read the information you receive from your payroll vendor and Inland Revenue

• Assess information taken during EOFY to evaluate the financial situation of your business.
• Request your payroll provider to send EOFY details when you can, so that it can be reviewed.
• Access to Inland Revenue documents, including PAYE tax obligations, as well as KiwiSaver obligations for employees.

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

• Update your employer superannuation contribution tax (ESCT) rates*, with the rates differing for each employee based on their income and length of employment.
• You must file electronically, in accordance with the mandate, if your business pays $50k or more in PAYE tax and ESCT.

*For KiwiSaver, businesses need to pay ESCT on compulsory employers’ contributions of 3 percent but not on contributions taken from wage payments to employees.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, along with expenditure on improvements or upkeep, 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 stock write-downs are not usually tax-deductible.
• Make sure to make payments within 63-days after 31 March in order to claim a deduction for employee-related expenses such as bonus pay, holiday pay and long-service leaves.
• If your income is significantly more than it was last year, you may want to consider an additional voluntary tax payment to make sure your tax payments are aligned with your turnover.

6. Keep business and personal finances distinct

You generally don’t get tax deductions for personal expenses. it’s just business expenses. You could be racking up unnecessary compliance costs in the event that your accountant needs to divide what is tax-deductible and the rest of it.

Tax dates for 2021 are important.

• 9 Feb 2021 Income tax for 2020 due for taxpayers who don’t have a tax representative.
• 1 March 2021 GST return and payment due by January for companies that file every two months.
• 31 March 2021 - 2020 income tax return due for tax agents (with an extended time).
• 1. April, 2021 - the new financial year begins with New Zealand.
• 7 May 2021 Final proviso tax instalment due for 2020’s fiscal year and the final opportunity to make voluntary tax payments.
• 7 May 2021 Tax return for the year’s end and due payment.

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