Important dates and advice to help small businesses prepare for EOFY

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

For smaller businesses like restaurants and retailers, it’s especially important to monitor the stock levels in advance of the closing date of the financial year approaches.

If you visit your accountant and can’t remember the levels of your stocks from just a few months ago, that creates difficulties.

A good reminder for small business owners is that a temporary boost in the write-off of assets in the moment 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 affect a lot of small businesses.

Three significant changes are coming in 2021.

Below are other significant tax-related changes that took place recently or are in the works for 2021.

1. Don’t forget that the minimum wage is set to increase by $1.10, taking it to $18.90 to $20 an hour on April 1, 2021. This could potentially affect your financial records and superannuation payouts.
2. A new 39% personal tax rate will apply for incomes above $180,000. The new rate will take effect from April 1, 2021. Tachibana claims that it is more likely to affect those who earn a living from providing personal services, as opposed to those who have an investment and enjoy capital gains.
3. Make sure you are aware that ACC Earners’ levy, that helps pay for the expenses that are incurred by injuries to employees, will remain at current levels until 2022 to assist businesses in coping with the financial burdens of COVID-19. At the time of January 2021 the levy was $1.39 100 cents (1.39%).

The fundamental elements of EOFY achievement

Here are some important advice and dates from experts who small business owners might wish to consider when getting their house 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 for a view of the entire year.
• Examine debtors at the time of 31 March and consider the possibility of writing off any bad debts to be considered a year-end deduction.
• You should list clients or suppliers who have paid you invoices on the 31st of March or before, but who won’t be due until the end of April. Take these costs into consideration as expenses for 2020-21.

2. Clean up and reconcile your files

• Bank statements should be consolidated, income tax year-end and sales records, along with expense, and purchase records.
• Reconcile your bank accounts and verify that they are in line with the balances on your bank statements.
• Make a profit and loss statement in order to calculate the annual revenue your business has earned.

3. Re-read the information you receive from your payroll provider and Inland Revenue

• Check the information taken during EOFY to evaluate the financial health of your business.
• Ask your payroll vendor to supply EOFY information as early as possible so it can be analysed.
• Access Inland Revenue documents, including PAYE tax obligations, as well as KiwiSaver obligation for workers.

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

• Check your employer’s superannuation contributions tax (ESCT) rates*, with rates dependent on their earnings and length of their tenure.
• Electronically file, as required by law, if your company pays more than $50,000 per year in ESCT and PAYE taxes.

*For KiwiSaver companies, they must pay ESCT on employee contributions up to 3% but not on contributions taken out of the employee’s wages.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases during the year, plus the cost of improvements or maintenance in order to claim any EOFY refunds.
• Consider disposing of obsolete stock since provisions for obsolete stock or write-downs of stock are not typically tax-deductible.
• It is recommended to pay within 63-days after 31 March to obtain the benefit of a deduction for expenses related to employees like bonuses, holiday pay, and long-service leave.
• If your income is significantly higher than last year, think about making an additional voluntary provisional tax payment to align your tax obligations to your income.

6. Maintain personal and financial finances separated

There aren’t any tax deductions for personal expenditure; it’s only your business expenses, you could be adding unnecessary compliance costs if your accountant has to split up what’s tax deductible and what’s not.

Some key 2021 tax dates

• 9 Feb 2021 - 2020 income tax due for those who do not have a tax advisor.
• 1 March 2021 - GST return and due at the end of January for companies that file every two months.
• 31 March 2021 2020 income tax return due for clients of tax professionals (with an effective extension of time).
• 1 April 2021 the start of the new financial year starts on the island of New Zealand.
• 7 May 2021 Final provisional tax instalment due for 2020’s fiscal year and the last opportunity to make voluntary tax payments.
• 7 May 2021 Tax return for the year’s end and payment due.

Notice: Some dates may differ from the official deadline, for example when a due date falls on a holiday weekend or public holiday.