Key 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 – along with tenancy management software such as myRent.co.nz can save businesses time.

Smaller companies, like restaurants or retail stores it is crucial to track stock levels as the close of the financial year looms.

If you go to your accountant but aren’t able to recall your stock levels from just a few months ago, that creates difficulties.

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

It’s a change that could have a big impact on small-scale businesses.

3 significant changes for 2021

Below are other important tax-related reforms that took place recently or are scheduled for 2021.

1. Do not forget that the minimum wage is set to increase by $1.10, taking it between $18.90 to $20 per hour as of 1 April 2021. This could potentially affect your financial records and superannuation payouts.
2. A new 39% personal tax rate will be imposed on earnings of greater than $180,000. The new tax rate will be in effect starting on April 1st, 2021. Tachibana claims that this will more likely impact those who make a living by providing personal services in contrast to those who hold the shares and make capital gains.
3. Take note that ACC Earners’ levy, which helps cover the costs related to injuries sustained by employees, will remain at the current levels until 2022 to help businesses deal with the financial strains of COVID-19. As at January 2021, the levy sits at $1.39 100 cents (1.39%).

The building blocks for EOFY achievement

Here are some tips and dates from experts who small business owners might need to be aware of while putting their home organized for tax season.

1. Finalise your accounts

• Review and approve your bills, invoices and expense claims.
• Check overdue accounts and outstanding transactions to gain a view of the year in its entirety.
• Review debtors as at 31 March, and think about writing off any bad debts so they are considered a year-end deduction.
• Include clients or suppliers that have been invoiced on or before 31 March or earlier but will not be paid until after April. Consider treating these costs as 2020-21 costs.

2. Clean up and reconcile your records

• Consolidate bank statements, income tax year-end and sales records, along with expenses, and purchase records.
• Check your bank accounts to ensure they are reconciled and check they match the balances from your bank statements.
• Prepare your profit and loss statement to calculate the profits your company made annually.

3. Check the data you received from your payroll company and Inland Revenue

• Review the information you have collected during EOFY to determine the current financial condition of your company.
• Ask your payroll vendor to supply EOFY information as early as possible to allow it to be analysed.
• Access Inland Revenue information, including PAYE tax obligations, as well as KiwiSaver requirements for the employees.

4. Manage superannuation

• Update your employer superannuation contribution tax (ESCT) rates*, with the rates differing for each employee based on their earnings and length of service.
• Electronically file, as required in the event that your business pays $50,000 or more a year in tax on PAYE and ESCT.

*For KiwiSaver, businesses need to pay ESCT on compulsory employers’ contributions of 3 percent but not on contributions that are deducted from wage payments to employees.

5. Maximise your tax refunds

• Track expenses and asset purchases during the year, plus spending on repairs or maintenance in order to claim any EOFY refunds.
• Consider disposing of obsolete stock in light of the fact that provisions for old stock or stock write-downs aren’t generally allowed as tax deductions.
• Make sure to make payments within 63 days of 31 March to obtain the benefit of a deduction for expenses related to employees such as bonus pay, holiday pay and long-service leaves.
• If your income is significantly greater than the previous year, think about making an additional provisional tax payment to align your tax payments with your earnings.

6. Make sure that personal and business finances are separate

Tax deductions are not usually available for personal expenses. deductions on personal expenses. If it’s only your business expenses. However, you may be adding unnecessary compliance costs if your accountant has to separate what’s tax-deductible and what’s not.

Tax dates for 2021 are important.

• 9 Feb 2021 - 2020 income tax to be paid for those who don’t have a tax advisor.
• 1 March 2021 - GST return and tax due by January for businesses that file each two months.
• 21 March Tax year 2020 return due for clients of tax professionals (with an effective extension of time).
• 1 April 2021 The new fiscal year starts on the island of New Zealand.
• 7 May 2021 - final provisional tax instalment due for the 2020 financial year and the final opportunity to make provisional tax payments.
• 7 May 2021 End-of-year GST return and payment due.

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