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

The use of intuitive accounting software and cloud storage like Google Drive or Dropbox – in addition to tenancy administration software such as myRent.co.nz can save businesses time.

For small businesses such as restaurants and retailers it is crucial to monitor stock levels when the closing date of the financial year draws near.

If you go to your accountant and are unable to remember the stock levels you had just a few months ago this can lead to problems.

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

This is a change that will affect a lot of small-scale businesses.

3 important changes in 2021

Below are other important tax-related changes which have occurred recently or are on the agenda for 2021.

1. Don’t forget that the minimum wage will increase by $1.10 increasing it to $18.90 to $20 per hour as of 1 April 2021. This could impact your financial records and superannuation payments.
2. A new personal tax rate will be applied for incomes above $180,000. The new rate will take effect starting on April 1st, 2021. Tachibana believes this will more likely be a problem for those who earn income through personal services, in contrast to those who hold investments and earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, which funds the costs that are incurred by injuries to employees, will remain at its present levels until 2022 to assist businesses in coping with the financial burdens of COVID-19. As at January 2021, the levy was $1.39 for every $100 (1.39 percent).

The building blocks for EOFY successful EOFY

Here are some important guidelines and dates from professionals which small-business owners might wish to consider while putting their home organized for tax season.

1. Finalise your accounts

• Make sure you approve the invoices, bills and expense claims.
• Monitor accounts that are due and outstanding transactions to get a view of the entire year.
• Review the debtors’ accounts as of 31 March. You may also consider writing off any bad debts so that they can be counted as an end-of-year deduction.
• Include clients or suppliers that have paid you invoices on the 31st of March or before but aren’t due until the end of April. Consider treating these costs as 2020-21 costs.

2. Clean up and reconcile your records

• Consolidate bank statements, income tax year-end records, sales, purchase and expense records.
• Reconcile your bank accounts and check they match the balances from your bank statement.
• Create a profit and loss account to calculate the profits your company made annually.

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

• Assess information taken during EOFY to evaluate the current financial situation of your business.
• Get your payroll company to supply EOFY information as early as possible to allow it to be analysed.
• Access to Inland Revenue records, which include PAYE tax obligations and KiwiSaver obligation for workers.

4. Manage your superannuation

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the tax rate differing for each employee based on their earnings and length of tenure.
• Filing electronically, as required when your business is paying $50,000 or more a year in ESCT tax and PAYE tax.

*For KiwiSaver companies, they must pay ESCT on compulsory employer contributions of 3%, but not on contributions taken from wage payments to employees.

5. Maximise your tax refunds

• Log expenses and asset purchases throughout the year, as well as expenditure on improvements or upkeep, to claim any EOFY refunds.
• Consider disposing of obsolete stock in light of the fact that provisions for old stock or stock write-downs are not typically allowed as tax deductions.
• Consider making payments within 63 days after 31 March in order to claim an allowance for employee-related expenses such as bonuses, holiday pay, and long-service leave.
• If your earnings are significantly higher than last year, think about making an additional voluntary tax payment to align your tax obligations with your earnings.

6. Keep business and personal finances distinct

Tax deductions are not usually available for personal expenses. deductions on personal expenses. If only company expenses. But you might be incurring unnecessary compliance costs when your accountant is required to split up what’s tax deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 Tax on income for 2020 due for taxpayers who don’t have a tax advisor.
• 1 March 2021 - GST return and due by the end of January for companies that file every two months.
• 30 March 2021 - 2020 income tax return due for tax professionals (with an extended time).
• 1. April, 2021 The new fiscal year starts from New Zealand.
• 7 May 2021 Final installment of tax provisional due for the financial year 2020 and last chance to make voluntary provisional tax payments.
• 7 May 2021 - end-of-year GST return and payment due.

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