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

Utilizing 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.

Smaller companies, like retailers or restaurants It’s particularly important to track stock levels as the end of financial year approaches.

If you visit your accountant and are unable to remember the levels of your stocks from the last few months and you’re having trouble remembering, it’s a problem.

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

This change will have a significant impact on small-scale enterprises.

3 significant changes for 2021

Here are some additional significant tax-related changes which have occurred recently or are in the works for 2021.

1. Don’t forget that the minimum wage is set to increase by $1.10 and will increase up from $18.90 to $20 per hour on April 1, 2021. This could affect your financial records and superannuation payment.
2. A new 39% personal tax rate will apply to incomes of more than $180,000. The new tax rate will be in effect from April 1, 2021. Tachibana says this will more likely affect those who earn income by providing personal services in contrast to those who hold an investment and enjoy capital gains.
3. Take note that ACC Earners’ levy, that covers the cost related to injuries sustained by employees, will be kept at present levels until 2022 to help companies deal the financial burdens of COVID-19. As at January 2021, the levy stood at $1.39 100 cents (1.39 percent).

The building blocks for EOFY the success of EOFY

Here are some helpful information and dates from experts who small business owners might want to keep in mind as they get their home organized for tax season.

1. Finalise your accounts

• Review and approve your invoices, bills and expense claims.
• Monitor accounts that are due as well as outstanding transactions to get an overview of the year in its entirety.
• Review the debtors’ accounts as of 31 March and consider the possibility of writing off any bad debts to be considered an end-of-year deduction.
• List suppliers or clients who’ve invoiced you by 31 March or before but aren’t reimbursed till after April. Consider treating these costs as 2020-21 expenses.

2. Make sure you reconcile and clean up your records

• Incorporate bank statement statements and year-end income tax documents, as well as sales, expense and purchase records.
• Consolidate your bank accounts and make sure they are in balance with the amounts on your bank statements.
• Prepare your profit-and-loss statement to calculate the annual profit your business made.

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

• Review the information you have collected during EOFY to review the current financial position of your business.
• Ask your payroll vendor to send EOFY details as early as possible so that it can be reviewed.
• Access to Inland Revenue records, including PAYE tax obligations and KiwiSaver obligations for employees.

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

• Update your employer superannuation contribution tax (ESCT) rates*, with the rate varying for each employee based on their salary and length of their tenure.
• You must file electronically, in accordance with the mandate when your business is paying at least $50,000 in tax on PAYE and ESCT.

*For KiwiSaver businesses, they have to pay ESCT on compulsory employer contributions of 3%, but not on contributions taken out of the employee’s wages.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, plus expenses for improvements or maintenance to claim any refunds from EOFY.
• Consider disposing of obsolete stock, as provisions for obsolete stock or write-downs on stock aren’t usually tax-deductible.
• It is recommended to pay within 63 days of 31 March to obtain an employee-related expense deduction such as bonuses, holiday pay, and long-service leaves.
• If your income is significantly greater than the previous year, you might want to make an additional provisional tax payment to make sure your tax payments are aligned with turnover.

6. Maintain personal and financial finances Separately

You generally don’t get tax deductions for personal expenses; only business expenses. You could add unnecessary compliance charges If your accountant must divide what is tax-deductible and what’s not.

Some key 2021 tax dates

• 9 February 2021 Income tax for 2020 due for taxpayers who don’t have a tax representative.
• 1 March 2021 - GST return and payment due at the end of January for companies that file every two months.
• 21 March - 2020 income tax return due for tax agents (with a valid extension of time).
• 1 April 2021 the start of the new financial year begins on the island of New Zealand.
• 7 May 2021 - final proviso tax instalment due for 2020’s fiscal year and the final opportunity to make provisional tax payments.
• 7 May 2021 - end-of-year GST return and payment due.

NOTE: Some dates may differ from the deadline, such as the due date is a weekend or public holiday.