Important dates and tips to help small businesses prepare for EOFY

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

Smaller businesses, such as restaurants or retailers it is crucial to monitor stock levels when the closing date of the financial year is near.

If you visit your accountant and can’t remember the levels of your stocks from a couple of months ago it can cause problems.

A great reminder for small business owners is that a temporary boost in the immediate asset write-off period during COVID-19 from $500 to $5,000 – will be increased back to $1,000 as of 17 March 2021.

This is a change that will have a big impact on small-scale companies.

Three significant changes are coming in 2021.

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

1. Do not forget that the minimum wage will increase by $1.10 increasing it up from $18.90 to $20 per hour starting on April 1 2021. This could affect your financial records as well as superannuation benefits.
2. A new 39% personal tax rate will apply to incomes of more than $180,000. The new rate will take effect starting on April 1st, 2021. Tachibana claims that this will more likely impact those who make a living from personal service, rather than those who hold investments and earn capital gains.
3. Be aware that the ACC Earners’ levy, that covers the cost associated with employee injuries, will remain at its current levels until 2022 to help companies deal the financial burdens of COVID-19. In January 2021, the levy was $1.39 for every $100 (1.39 percent).

The building blocks for EOFY success

Here are some important tips and dates from experts that small-business owners may be able to remember to ensure their house is ready for tax time.

1. Finalise your accounts

• Check and approve your bills, invoices and expense claims.
• Check overdue accounts and outstanding transactions for an overview of the entire year.
• Examine debtors at the time of 31 March. You may also consider the possibility of writing off any bad debts so they are considered an annual deduction at the end of the year.
• Include clients or suppliers that have invoiced you by 31 March or earlier, but who won’t be due until the end of April. Think about treating these expenses as 2020-21 expenses.

2. Make sure you reconcile and clean up your records

• Combine bank accounts, income tax year-end documents, as well as sales, expense, and purchase records.
• Reconcile your bank accounts , and check they match the balances from your bank statements.
• Prepare your profit-and-loss statement to determine how much annual profit your business made.

3. Review data from your payroll vendor and Inland Revenue

• Examine the data collected during EOFY to assess the financial situation of your business.
• Ask your payroll vendor to supply EOFY information as early as possible to allow it to be analysed.
• Access Inland Revenue information, including PAYE tax obligations, as well as KiwiSaver obligation for workers.

4. Manage superannuation

• Change your employer’s superannuation tax (ESCT) rates*, with the tax rate varying for each employee based on their salary and length of employment.
• Filing electronically, as required when your business is paying $50k or more in PAYE tax and ESCT.

*For KiwiSaver businesses, they need to pay ESCT on employee contributions up to 3%, but not on contributions taken out of wage payments to employees.

5. Maximise your tax refunds

• Track expenses and asset purchases during the year, along with the cost of improvements or maintenance, to claim any refunds from EOFY.
• Consider disposing of obsolete stock because provisions for the disposal of obsolete stock or stock write-downs aren’t typically tax-deductible.
• Make sure to make payments within 63-days after 31 March to get an allowance for employee-related expenses like bonuses, holiday pay, or long-service leaves.
• If your income is substantially higher than what you earned last year, think about making an additional tax provisional payment to ensure that your tax payment is aligned with your earnings.

6. Separate personal and business finances Separately

It is not common to get tax deductions for personal expenses. you only get deductions for company expenses. But you might add unnecessary compliance charges in the event that your accountant needs to split up what’s tax deductible and what’s not.

Tax dates for 2021 are important.

• 9 February 2021 - 2020 income tax to be paid for those who don’t have a tax agent.
• 1 March 2021 GST return due and payment due at the end of January for businesses that file each two months.
• 31 March 2021 Tax year 2020 return due for clients of tax agents (with a valid extension of time).
• 1 April 2021 The new fiscal year begins on the island of New Zealand.
• 7 May 2021 Final proviso tax instalment due for the 2020 financial year and the final opportunity to make tax provisional voluntary payments.
• 7 May 2021 GST tax return at the end of the year and payment due.

Notice: Some dates may differ from the official deadline, such as if a due date falls on a holiday weekend or public holiday.