Important dates and tips to help small businesses prepare for EOFY

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

For smaller businesses like restaurants or retailers It’s particularly important to track stock levels as the close of the financial year approaches.

If you visit your accountant and can’t remember your stock level from just a few months ago it can cause problems.

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

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

3 important changes in 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. Don’t forget that the minimum wage will rise by $1.10 increasing it to $18.90 to $20 per hour as of 1 April 2021. This could affect your financial records and superannuation payments.
2. A new 39% personal tax rate is set to apply on earnings of greater than $180,000. The new rate will apply starting on April 1st, 2021. Tachibana says it is more likely to affect those who earn a living through personal services, rather than those who hold an investment and enjoy capital gains.
3. It is important to be aware of the ACC Earners’ levy, that helps pay for the expenses that are incurred by injuries to employees, will remain at its their current levels until 2022, to help companies deal with the financial pressures of COVID-19. At the time of January 2021 the levy was $1.39 each $100 (1.39 percent).

The building blocks for EOFY successful EOFY

Here are some key advice and dates from experts that small-business owners may be able to remember to ensure their house is ready for tax time.

1. Finalise your accounts

• Review and approve your invoices, bills and expense claims.
• Follow up overdue accounts and outstanding transactions to gain a view of the entire year.
• Examine debtors at the time of 31 March, and think about the possibility of writing off any bad debts in order to make them an expense at the end of the year.
• List suppliers or clients who’ve been invoiced on or before 31 March or earlier but won’t be due until the end of April. You might want to consider treating these costs as 2020-21 expenses.

2. Make sure you reconcile and clean up your records

• Consolidate bank statements, year-end income tax records, sales, expense and purchase records.
• Reconcile your bank accounts , and make sure they are in balance with the amounts on your bank statements.
• Create a profit and loss account to determine how much profits your company made annually.

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

• Review the information you have collected during EOFY to review the financial health of your business.
• Request your payroll provider to provide EOFY data as early as possible to allow it to be analysed.
• Access Inland Revenue information, including PAYE tax responsibilities and any KiwiSaver obligation for workers.

4. Superannuation management

• Update your employer superannuation contribution tax (ESCT) rates*, with rates different for each employee depending on their salary and length of service.
• File electronically, as mandated when your business is paying more than $50,000 per year in ESCT and PAYE taxes.

*For KiwiSaver businesses, they have to pay ESCT on contribution from employers of up to 3 per cent, but not on contributions deducted from the wages of employees.

5. Maximise your tax refunds

• Log expenses and asset purchases during the year, plus the cost of improvements or maintenance for claiming any EOFY refunds.
• You should consider disposing of old stock because provisions for the disposal of obsolete stock or stock write-downs are not typically tax-deductible.
• It is recommended to pay within 63 calendar days following 31 March, to receive a deduction for employee-related expenses like bonuses, holiday pay, or long-service leaves.
• If your income is significantly greater than the previous year, think about making an additional voluntary provisional tax payment to align your tax payments with your turnover.

6. Make sure that personal and business finances are Separately

There aren’t any tax deductions on personal expenses. If it’s just business expenses, you could be adding unnecessary compliance costs in the event that your accountant needs to determine what tax-deductible and what’s not.

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 tax due at the end of January for businesses filing every two months.
• 30 March 2021 - 2020 income tax return due for tax agents (with a valid extension of time).
• 1. April, 2021 - the new financial 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 End-of-year GST return and payment due.

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