Important dates and tips to help small businesses prepare for end of financial year

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

For small businesses such as restaurants and retailers, it’s especially important to track stock levels as the end of financial year draws near.

If you visit your accountant but aren’t able to recall your stock level from a couple of months ago, that creates difficulties.

A good reminder for smaller business owners is that a temporary increase of the instant asset write-off during COVID-19, from $500 to $5,000 – will be increased back to $1,000 beginning 17 March 2021.

It’s a change that could be a major impact on small-scale businesses.

3 significant changes for 2021

Here are some additional important tax-related tax changes which have occurred recently or are scheduled for 2021.

1. Remember that the minimum wage will increase by $1.10 and will increase to $18.90 to $20 per hour from April 1 2021. This could potentially affect your financial records and superannuation benefits.
2. A new personal tax rate will apply on earnings of greater than $180,000. The new rate will take effect from April 1, 2021. Tachibana claims that this is more likely to affect those who earn a living from providing personal services, as opposed to those who have investment accounts and are able to earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, that covers the cost of injuries suffered by employees will remain at their current levels until 2022, to help businesses cope the financial burdens of COVID-19. In January 2021, the levy is $1.39 100 cents (1.39 percent).

The fundamental elements of EOFY successful EOFY

Here are some key information and dates from experts which small-business owners might need to be aware of when getting their house organized for tax season.

1. Finalise your accounts

• Review and approve your bills, invoices and expense claims.
• Monitor accounts that are due and outstanding transactions to get an overview of the year in its entirety.
• Examine debtors at the time of 31 March. Consider taking any bad debts off so they are considered an expense at the end of the year.
• Include clients or suppliers that have paid you invoices on the 31st of March or before but aren’t reimbursed till after April. You might want to consider treating these costs as expenses for 2020-21.

2. Clean up and reconcile your records

• Incorporate bank statement statements and year-end income tax and sales records, along with expense and purchase records.
• Check your bank accounts to ensure they are reconciled and check they match the balances 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 provider and Inland Revenue

• Assess information that you have collected during EOFY to assess the financial condition of your company.
• Request your payroll provider to send EOFY details as soon as you can to allow it to be analysed.
• Access to Inland Revenue records, including PAYE tax obligations and KiwiSaver requirements for the employees.

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

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the rates different for each employee depending on their earnings and length of their tenure.
• File electronically, as mandated 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 employers’ contributions of 3 percent, but not on contributions taken from the employee’s wages.

5. Maximise your tax refunds

• Record all expenses and purchases of assets in the course of the year, and spending on repairs or maintenance in order to claim any refunds from EOFY.
• Consider disposing of obsolete stock in light of the fact that provisions for old stock or stock write-downs are not usually tax-deductible.
• It is recommended to pay within 63 days after 31 March to get an employee-related expense deduction such as bonuses, holiday pay, or long-service leaves.
• If your income is substantially higher than last year, consider making an additional voluntary tax payment to align your tax obligations to your income.

6. Make sure that personal and business finances are distinct

Tax deductions are not usually available for personal expenses. deductions on personal expenses. If it’s only your business expenses. However, you may be incurring unnecessary compliance costs when your accountant is required to determine what tax-deductible and the rest of it.

Important tax dates in 2021

• 9 February 2021 - 2020 income tax due for those who don’t have a tax professional.
• 1 March 2021 GST return due and payment due at the end of January for businesses that file each two months.
• 31 March 2021 2021 – 2020 tax return due for tax professionals (with a valid extension of time).
• 1. April, 2021 The new financial year begins from New Zealand.
• 7 May 2021 Final proviso tax instalment due for the financial year 2020 and the final opportunity to make voluntary tax payments.
• 7 May 2021 End-of-year GST return and due payment.

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