Important dates and advice to help small businesses get ready for end of financial year

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

Smaller companies, like restaurants and retailers It’s crucial to keep track of stock levels as the time for the end of the fiscal year draws near.

If you visit your accountant but aren’t able to recall the levels of your stocks from the last few months, that creates difficulties.

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

This change will be a major impact on small businesses.

3 significant changes for 2021

Here are some other important tax-related reforms that occurred recently or are planned for 2021.

1. Don’t forget that the minimum wage will increase by $1.10 and will increase up from $18.90 to $20 per hour as of 1 April 2021. This could affect your financial records as well as superannuation payouts.
2. A new personal tax rate will apply to incomes of more than $180,000. The new tax rate is effective from 1 April 2021. Tachibana believes this is likely to affect those who earn income by providing personal services in contrast to those who hold investment accounts and are able to earn capital gains.
3. Take note that ACC Earners’ levy, that covers the cost of injuries suffered by employees will remain at the their current levels until 2022, to assist businesses in coping with the financial pressures of COVID-19. In January 2021, the levy stood at $1.39 for every $100 (1.39 percent).

The essential elements to EOFY successful EOFY

Here are some key information and dates from experts which small-business owners might be able to remember to ensure their house is in order for tax time.

1. Finalise your accounts

• Review and approve your invoices, bills and expense claims.
• Check overdue accounts as well as outstanding transactions to get an overview of the year’s total.
• Review debtors as at 31 March, and think about eliminating any outstanding debts in order to make them an annual deduction at the end of the year.
• Include clients or suppliers that have been invoiced on or before 31 March or earlier, but who won’t be reimbursed till after April. Think about treating these expenses as 2020-21 costs.

2. Clean up and reconcile your records

• Bank statements should be consolidated, income tax year-end and sales records, along with expense, and purchase records.
• Consolidate your bank accounts and make sure they are in balance with the amounts from your bank statement.
• Create a profit and loss account to work out how much annual profit your business made.

3. Review data from your payroll vendor as well as Inland Revenue

• Assess information that you have collected during EOFY to evaluate the financial position of your business.
• Contact your payroll provider to send EOFY details as soon as you can so that it can be reviewed.
• Access to Inland Revenue records, which include PAYE tax obligations and KiwiSaver obligation for workers.

4. Superannuation management

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the rate different for each employee depending on their salary and the length of their tenure.
• Electronically file, as required by law, if your company pays $50k or more in tax on PAYE and ESCT.

*For KiwiSaver, businesses need to pay ESCT on mandatory employer contributions of 3% but not on contributions that are deducted from employee wages.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, along with spending on repairs or maintenance to claim any EOFY refunds.
• Think about disposing of stock that is no longer needed, as provisions for obsolete stock or stock write-downs aren’t typically tax-deductible.
• Make sure to make payments within 63 days of 31 March to get a deduction for employee-related expenses like bonuses, holiday pay, or long-service leave.
• If your income is more than it was last year, think about making an additional voluntary tax payment to align your tax obligations to your income.

6. Keep business and personal finances separate

There aren’t any tax deductions on personal expenses. If it’s only your company expenses. But you might be adding unnecessary compliance costs if your accountant has to split up what’s tax deductible and the rest of it.

Tax dates for 2021 are important.

• 9 Feb 2021 Tax on income for 2020 due for those who do not have a tax agent.
• 1 March 2021 - GST return and due by January for companies that file every two months.
• 31 March 2021 2020 income tax return due for clients of tax agents (with an extension valid for time).
• 1. April, 2021 the start of the new financial year begins from New Zealand.
• 7 May 2021 - final installment of the tax proviso for the fiscal year 2020 and the last opportunity to make provisional tax payments.
• 7 May 2021 GST tax return at the end of the year and due payment.

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