Key dates and advice to help small businesses get ready for EOFY

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

For small businesses such as retailers or restaurants It’s crucial to monitor the stock levels in advance of the time for the end of the fiscal year looms.

If you go to your accountant, and you are unable to recall your stock levels from just a few months ago it can cause problems.

A good 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 – is set to be lowered back to $1,000 starting 17 March 2021.

That’s a change that will be a major impact on small-scale enterprises.

3 important changes in 2021

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

1. Remember that the minimum wage will increase by $1.10, taking it between $18.90 to $20 an hour from April 1 2021. It could affect your financial records and superannuation benefits.
2. A new personal tax rate will be applied to incomes of more than $180,000. The new rate will apply from 1 April 2021. Tachibana states that this is more likely to impact those who make a living from providing personal services, in contrast to those who hold an investment and enjoy capital gains.
3. It is important to be aware of the ACC Earners’ levy, that helps pay for the expenses related to injuries sustained by employees, will remain at its their current levels until 2022, to help companies deal with the financial pressures of COVID-19. As at January 2021, the levy was $1.39 for every $100 (1.39%).

The essential elements to EOFY successful EOFY

Here are some key tips and dates from experts that small business owners might wish to consider while putting their home up and running for tax time.

1. Finalise your accounts

• Make sure you approve the invoices, bills and expense claims.
• Monitor accounts that are due as well as outstanding transactions to get a view of the year’s total.
• Review the debtors’ accounts as of 31 March. You may also consider taking any bad debts off to be considered an expense at the end of the year.
• You should list clients or suppliers who have invoiced you by 31 March or before but won’t be reimbursed till after April. Consider treating these costs as expenses for 2020-21.

2. Make sure you reconcile and clean up your records

• Incorporate bank statement statements and year-end income tax records, plus sales, expense and purchase records.
• Check your bank accounts to ensure they are reconciled and check they match the balances on your bank statements.
• Make a profit and loss statement in order to work out how much annual profit your business made.

3. Examine the information from your payroll company and Inland Revenue

• Assess information taken during EOFY to determine the financial health of your business.
• Ask your payroll vendor to submit EOFY data in the earliest time possible so that it can be reviewed.
• Access Inland Revenue information, including PAYE tax obligations and KiwiSaver requirements for the employees.

4. Superannuation management

• Check your employer’s superannuation contributions tax (ESCT) rates*, with rates varying for each employee based on their salary and length of employment.
• File electronically, as mandated by law, if your company pays $50,000 or more a year in ESCT tax and PAYE tax.

*For KiwiSaver companies, they must pay ESCT for compulsory employee contributions up to 3% but not on contributions deducted from employee wages.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases during the year, along with the cost of improvements or maintenance in order to claim any EOFY refunds.
• You should consider disposing of old stock, as provisions for obsolete stock or stock write-downs aren’t usually tax-deductible.
• It is recommended to pay within 63 days after 31 March to obtain an allowance for employee-related expenses like bonuses, holiday pay, or long-service leaves.
• If your earnings are significantly higher than last year, think about making an additional provisional tax payment to align your tax obligations with your earnings.

6. Make sure that personal and business finances are separated

It is not common to get tax deductions on personal expenses. If it’s just business expenses, you could be adding unnecessary compliance costs when your accountant is required to determine what tax-deductible and the rest of it.

Some key 2021 tax dates

• 9 February 2021 Income tax for 2020 to be paid for those who don’t have a tax professional.
• 1 March 2021 - GST return due and payment due for the end of January for companies that file every two months.
• 30 March 2021 - 2020 income tax return due for tax professionals (with a valid extension of time).
• 1 April 2021 The new fiscal year begins with New Zealand.
• 7 May 2021 - final installment of tax provisional due for the fiscal year 2020 and the final opportunity to make provisional tax payments.
• 7 May 2021 End-of-year GST return and due payment.

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