Key dates and advice to help small businesses prepare for EOFY

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

For smaller businesses like restaurants and retailers It’s particularly important to monitor the stock levels in advance of the end of financial year looms.

If you visit your accountant but aren’t able to recall the stock levels you had a couple of months ago this can lead to problems.

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

That’s a change that will have a big impact on small-scale companies.

3 important changes in 2021

Here are some additional important tax-related reforms that took place recently or are scheduled for 2021.

1. Don’t forget that the minimum wage will rise by $1.10 increasing it between $18.90 to $20 per hour on April 1, 2021. It could affect your financial records as well as superannuation benefits.
2. A new 39% personal tax rate will be applied on earnings of greater than $180,000. The new tax rate is effective from 1 April 2021. Tachibana claims that this will more likely impact those who make a living from providing personal services, instead of those who own investment accounts and are able to earn capital gains.
3. Be aware that the ACC Earners’ levy, which helps cover the costs of injuries suffered by employees will remain at the present levels until 2022 to help businesses cope with the financial pressures of COVID-19. In January 2021, the levy was $1.39 for every $100 (1.39%).

The fundamental elements of EOFY the success of EOFY

Here are some helpful tips and dates from experts who small business owners might be able to remember when getting their house up and running for tax time.

1. Finalise your accounts

• Check and approve your bills, invoices and expense claims.
• Monitor accounts that are due as well as outstanding transactions to get an overview of the entire year.
• Review debtors as at 31 March. Consider taking any bad debts off so they are considered an end-of-year deduction.
• Note clients or suppliers who been invoiced on or before 31 March or before but aren’t invoiced until April. You might want to consider treating these costs as 2020-21 expenses.

2. Make sure you reconcile and clean up your records

• Incorporate bank statement statements and tax year-end statements, and sales records, along with expense, and purchase records.
• Reconcile your bank accounts , and make sure they are in balance with the amounts from 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 company and Inland Revenue

• Check the information obtained during EOFY to evaluate the current financial situation of your business.
• Ask your payroll vendor to supply EOFY information as soon as you can to allow it to be analysed.
• Access Inland Revenue documents, including PAYE tax obligations, as well as KiwiSaver obligation for workers.

4. Manage superannuation

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the rates differing for each employee based on their salary and length of their tenure.
• Electronically file, as required in the event that your business pays more than $50,000 per year in PAYE tax and ESCT.

*For KiwiSaver businesses, they need to pay ESCT on mandatory employer contributions of 3%, but not on contributions taken from wage payments to employees.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, along with the cost of improvements or maintenance, to claim any EOFY refunds.
• Consider disposing of obsolete stock since provisions for obsolete stock or write-downs on stock aren’t generally allowed as tax deductions.
• Make sure to make payments within 63-days after 31 March to obtain the benefit of a deduction for expenses related to employees like bonuses, holiday pay, or long-service leaves.
• If your earnings are significantly greater than the previous year, you might want to make an additional voluntary provisional tax payment to ensure that your tax payment is aligned with turnover.

6. Maintain personal and financial finances separated

There aren’t any tax deductions on personal expenses. If it’s only your business expenses. You could be racking up unnecessary compliance costs if your accountant has to divide what is 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 representative.
• 1 March 2021 - GST return and payment due for the end of January for businesses filing every two months.
• The deadline for filing is 31 March Tax year 2020 return due for tax agents (with an effective extension of the deadline).
• 1 April 2021 - the new financial year begins with New Zealand.
• 7 May 2021 - final installment of tax provisional due for the 2020 financial year and the final opportunity to make provisional tax payments.
• 7 May 2021 GST tax return at the end of the year and due payment.

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