Key dates and advice to help small businesses prepare for end of financial year

Using intuitive accounting software and cloud storage options like Google Drive or Dropbox – in addition to tenancy administration software like myRent.co.nz can save businesses time.

For smaller businesses like restaurants and retailers It’s particularly important to monitor the stock levels in advance of the closing date of the financial year draws near.

If you visit your accountant but aren’t able to recall your stock level from the last few months it can cause problems.

A good reminder for smaller business owners is that a temporary increase in the immediate asset write-off period during COVID-19 – from $500 to $5,000 – is set to be lowered back to $1,000 starting 17 March 2021.

It’s a change that could affect a lot of small-scale businesses.

3 significant changes for 2021

Here are some other important tax-related tax changes that took place recently or are planned for 2021.

1. Remember that the minimum wage will increase by $1.10 and will increase from $18.90 to $20 per hour starting on April 1 2021. This could potentially affect your financial records and superannuation payments.
2. A new personal tax rate will be applied on income above $180,000. The new rate will apply from 1 April 2021. Tachibana believes it is more likely to be a problem for those who earn income from personal service, rather than those who hold an investment and enjoy capital gains.
3. It is important to be aware of the ACC Earners’ levy, that covers the cost associated with employee injuries, will remain at its level until 2022 in order to help businesses cope with the financial strains of COVID-19. At the time of January 2021 the levy sits at $1.39 100 cents (1.39 percent).

The fundamental elements of EOFY the success of EOFY

Here are some helpful tips and dates from experts which small-business owners might want to keep in mind to ensure their house is up and running for tax time.

1. Finalise your accounts

• Make sure you approve the invoices, bills and expense claims.
• Check overdue accounts as well as outstanding transactions to get an overview of the year in its entirety.
• Review debtors as at 31 March. Consider eliminating any outstanding debts so that they can be counted as a year-end deduction.
• List suppliers or clients who’ve invoiced you on 31 March or before but aren’t reimbursed till after April. Take these costs into consideration as 2020-21 expenses.

2. Make sure you reconcile and clean up your files

• Combine bank accounts, year-end income tax documents, as well as sales, purchase and expense records.
• Reconcile your bank accounts and ensure that the balances are the same from your bank statement.
• Prepare your profit and loss statement to determine the amount of annual profits your business earned.

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

• Examine the data obtained during EOFY to evaluate the financial condition of your company.
• Request your payroll provider to send EOFY details in the earliest time possible so that it can be analyzed.
• Access to Inland Revenue documents, including PAYE tax obligations and KiwiSaver obligation for workers.

4. Manage superannuation

• Update your employer superannuation contribution tax (ESCT) rates*, with rates dependent on their salary and the length of employment.
• File electronically, as mandated by law, if your company pays $50,000 or more a year in ESCT and PAYE taxes.

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

5. Maximise your tax refunds

• Record all expenses and purchases of assets throughout the year, as well as expenditure on improvements or upkeep, to claim any refunds from EOFY.
• Think about disposing of stock that is no longer needed, as provisions for obsolete stock or stock write-downs aren’t typically tax-deductible.
• It is recommended to pay within 63 days of 31 March, to receive an allowance for employee-related expenses such as bonus pay, holiday pay and long-service leaves.
• If your income is substantially more than it was last year, consider making an additional voluntary provisional tax payment to align your tax payments with your turnover.

6. Separate personal and business finances separate

You generally don’t get tax deductions for personal expenses; it’s just business expenses. You could be incurring unnecessary compliance costs in the event that your accountant needs to separate what’s tax-deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 Income tax for 2020 to be paid for those who don’t have a tax agent.
• 1 March 2021 GST return and due for the end of January for businesses filing every two months.
• The deadline for filing is 31 March - 2020 income tax return due for clients of tax agents (with an extension valid for the deadline).
• 1. April, 2021 The new financial year begins in 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 vary from the official date, for example, if a due date is a weekend or public holiday.