Important dates and tips to help small businesses get ready for EOFY

Using intuitive accounting software and cloud storage services like Google Drive or Dropbox – and tenancy management software like myRent.co.nz - could save businesses time.

Smaller businesses, such as restaurants or retail stores 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 the levels of your stocks from just a few months ago this can lead to problems.

A good reminder for small entrepreneurs is that a temporary increase in the instant asset write-off during COVID-19 from $500 to $5,000 – is being scaled back to $1,000 starting 17 March 2021.

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

Three important changes to 2021

These are just a few of the important tax-related tax changes which have occurred recently or are in the works for 2021.

1. Do not forget that the minimum wage is set to increase by $1.10, taking it up from $18.90 to $20 per hour starting on April 1 2021. It could affect your financial records as well as superannuation payments.
2. A new personal tax rate will apply on income above $180,000. The new tax rate is effective from 1 April 2021. Tachibana believes this is likely to impact those who make a living by providing personal services in contrast to those who hold an investment and enjoy capital gains.
3. Take note that ACC Earners’ levy, which funds the costs that are incurred by injuries to employees, will remain at their current levels until 2022, to help companies deal with the financial pressures of COVID-19. At the time of January 2021 the levy stood at $1.39 100 cents (1.39 percent).

The building blocks for EOFY achievement

Here are some key guidelines and dates from professionals who small business owners might wish to consider as they get their home organized for tax season.

1. Finalise your accounts

• Review and approve your invoices, bills and expense claims.
• Check overdue accounts and outstanding transactions for an overview of the entire year.
• Examine debtors at the time of 31 March. Consider taking any bad debts off in order to make them an end-of-year deduction.
• You should list clients or suppliers who have invoiced you on 31 March or before but won’t be reimbursed till after April. Take these costs into consideration as 2020-21 costs.

2. Clean up and reconcile your files

• Combine bank accounts, year-end income tax documents, as well as sales, expenses, 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 determine the amount of annual revenue your business has earned.

3. Check the data you received from your payroll vendor as well as Inland Revenue

• Examine the data obtained during EOFY to review the financial situation of your business.
• Ask your payroll vendor to provide EOFY data as soon as you can so that it can be analyzed.
• Access to Inland Revenue documents, including PAYE tax obligations and KiwiSaver obligation for workers.

4. Superannuation management

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

*For KiwiSaver, businesses need to pay ESCT on compulsory employers’ contributions of 3 percent but not on contributions deducted from the wages of employees.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases throughout the year, as well as the cost of improvements or maintenance in order to claim any EOFY refunds.
• You should consider disposing of old stock since provisions for obsolete stock or write-downs of stock are not generally allowed as tax deductions.
• Make sure to make payments within 63-days after 31 March to obtain an allowance for employee-related expenses like bonus pay, holiday pay and long-service leaves.
• If your income is significantly greater than the previous year, think about making an additional voluntary provisional tax payment to make sure your tax payments are aligned to your income.

6. Keep business and personal finances distinct

Tax deductions are not usually available for personal expenses. deductions for personal expenses. it’s only your business expenses. You could be incurring unnecessary compliance costs in the event that your accountant needs to split up what’s tax deductible and the rest of it.

Some key 2021 tax dates

• 9 Feb 2021 2021 – 2020 tax year due for those who don’t have a tax advisor.
• 1 March 2021 - GST return and due for the end of January for companies that file every two months.
• 21 March 2020 income tax return due for tax professionals (with a valid extension of time).
• 1 April 2021 The new financial year starts 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 official date, for example, the due date falls on a weekend or public holiday.