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

Utilizing intuitive accounting software as well as cloud storage such as Google Drive or Dropbox – and tenancy management software like myRent.co.nz - could save businesses time.

For smaller businesses like restaurants or retail stores It’s particularly important to monitor the stock levels in advance of the end of financial year draws near.

If you visit your accountant and can’t remember your stock levels from the last few months, that creates difficulties.

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

This change will have a big impact on small businesses.

3 important changes in 2021

These are just a few of the important tax-related changes that occurred recently or are scheduled for 2021.

1. Remember that the minimum wage will rise by $1.10 to increase it between $18.90 to $20 per hour as of 1 April 2021. This could potentially affect your financial records and superannuation payment.
2. A new 39% personal tax rate will apply on earnings of greater than $180,000. The new rate will apply starting on April 1st, 2021. Tachibana claims that this is likely to affect those who earn income through personal services, rather than those who hold the shares and make capital gains.
3. It is important to be aware of the ACC Earners’ levy, which funds the costs related to injuries sustained by employees, will remain at their current levels until 2022, to help companies deal the financial burdens of COVID-19. As of January 20, 2021 the levy stood at $1.39 100 cents (1.39%).

The fundamental elements of EOFY successful EOFY

Here are some important information and dates from experts that small-business owners may be able to remember when getting their house up and running for tax time.

1. Finalise your accounts

• Make sure you approve the bills, invoices and expense claims.
• Follow up overdue accounts as well as outstanding transactions to get an overview of the entire year.
• Examine debtors at the time of 31 March. You may also 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 earlier, but who won’t be paid until after April. Think about treating these expenses as 2020-21 expenses.

2. Make sure you reconcile and clean up your records

• Consolidate bank statements, year-end income tax 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 work out how much profits your company made annually.

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

• Examine the data collected during EOFY to evaluate the financial situation of your business.
• Ask your payroll vendor to send EOFY details as soon as you can so it can be analysed.
• Access Inland Revenue information, including PAYE tax obligations, as well as KiwiSaver requirements for the employees.

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

• Change your employer’s superannuation tax (ESCT) rates*, with the rates different for each employee depending on their earnings and length of employment.
• Electronically file, as required in the event that your business pays at least $50,000 in ESCT and PAYE taxes.

*For KiwiSaver businesses, they have to pay ESCT on mandatory employee contributions up to 3%, but not on contributions that are deducted from employee wages.

5. Maximise your tax refunds

• Track expenses and asset purchases throughout the year, as well as expenditure on improvements or upkeep to claim any EOFY refunds.
• Take into consideration disposing of stocks that are no longer in use, as provisions for obsolete stock or stock write-downs aren’t generally allowed as tax deductions.
• Consider making payments within 63 days after 31 March to get the benefit of a deduction for expenses related to employees like bonuses, holiday pay, and long-service leave.
• If your income is higher than what you earned last year, you might want to make an additional voluntary tax payment to ensure that your tax payment is aligned with your earnings.

6. Make sure that personal and business finances are Separately

Tax deductions are not usually available for personal expenses. deductions for personal expenses; you only get deductions for business expenses, you could add unnecessary compliance charges in the event that your accountant needs to divide what is tax-deductible and what’s not.

Important tax dates in 2021

• 9 Feb 2021 Tax on income for 2020 due for those who don’t have a tax professional.
• 1 March 2021 - GST return and tax due at the end of January for businesses that file each two months.
• 30 March 2021 Tax year 2020 return due for tax agents (with a valid extension of time).
• 1. April, 2021 The new fiscal year starts on the island of New Zealand.
• 7 May 2021 Final installment of tax provisional due for the financial year 2020 and the last opportunity to make tax provisional voluntary payments.
• 7 May 2021 GST tax return at the end of the year and payment due.

Notice: Some dates may differ from the deadline, such as the due date falls on a holiday weekend or public holiday.