Important 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 - could save businesses time.

Smaller businesses, such as restaurants and retailers It’s crucial to keep track of stock levels as the closing date of the financial year looms.

If you go to your accountant but aren’t able to recall your stock levels from just a few months ago, that creates difficulties.

A great reminder for small entrepreneurs is that a temporary increase in 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 starting 17 March 2021.

This change will have a big impact on small-scale businesses.

Three significant changes are coming in 2021.

Here are some other important tax-related tax changes that took place recently or are scheduled for 2021.

1. Do not forget that the minimum wage will increase by $1.10 increasing it from $18.90 to $20 an hour as of 1 April 2021. This could impact your financial records and superannuation payment.
2. A new 39% personal tax rate will apply to incomes of more than $180,000. The new rate will apply from April 1, 2021. Tachibana claims that it is more likely to affect those who earn 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, which funds the costs associated with employee injuries, will remain at the their current levels until 2022, to help companies deal the financial burdens of COVID-19. At the time of January 2021 the levy is $1.39 100 cents (1.39%).

The foundational elements for EOFY the success of EOFY

Here are some important guidelines and dates from professionals which small-business owners might want to keep in mind while putting their home in order for tax time.

1. Finalise your accounts

• Check and approve your bills, invoices and expense claims.
• Check overdue accounts and outstanding transactions to gain a view of the year’s total.
• Review debtors as at 31 March, and think about the possibility of writing off any bad debts so that they can be counted as an expense at the end of the year.
• Note clients or suppliers who paid you invoices on the 31st of March or earlier but won’t be paid until after April. Think about treating these expenses as 2020-21 expenses.

2. Clean up and reconcile your files

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

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

• Examine the data collected during EOFY to assess the current financial position of your business.
• Contact your payroll provider to submit EOFY data in the earliest time possible so it can be analysed.
• Access to Inland Revenue information, including PAYE tax responsibilities and any KiwiSaver obligation for workers.

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

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with rates differing for each employee based on their salary and length of tenure.
• Filing electronically, as required in the event that your business pays at least $50,000 in tax on PAYE and ESCT.

*For KiwiSaver businesses, they need to pay ESCT for compulsory employer contributions of 3% but not on contributions taken from the wages of employees.

5. Maximise your tax refunds

• Log expenses and asset purchases in the course of the year, and expenditure on improvements or upkeep for claiming any refunds from EOFY.
• Think about disposing of stock that is no longer needed in light of the fact that provisions for old stock or stock write-downs are not generally allowed as tax deductions.
• You should consider making your payments within 63 days of 31 March in order to claim the benefit of a deduction for expenses related to employees such as bonus pay, holiday pay and long-service leave.
• If your income is more than it was last year, you might want to make an additional provisional tax payment to make sure your tax payments are aligned with your earnings.

6. Separate personal and business finances Separately

You generally don’t get tax deductions for personal expenditure; you only get deductions for business expenses. You could add unnecessary compliance charges in the event that your accountant needs to divide what is tax-deductible and the rest of it.

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 Tax on income for 2020 to be paid for those who don’t have a tax representative.
• 1 March 2021 GST return and tax due by January for those who file their GST returns every two months.
• 21 March 2021 – 2020 tax return due for tax agents (with an effective extension of time).
• 1. April, 2021 The new financial year begins on the island of New Zealand.
• 7 May 2021 - final provisional tax instalment due for the financial year 2020 and last chance to make tax provisional voluntary payments.
• 7 May 2021 GST tax return at the end of the year and due payment.

NOTE: Some dates may differ from the official deadline, for instance when a due date falls on a weekend or public holiday.