Key dates and tips to help small businesses prepare for end of financial year

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

Smaller companies, like restaurants or retailers It’s particularly important to keep track of stock levels as the closing date of the financial year is near.

If you go to your accountant but aren’t able to recall your stock level from the last few months and you’re having trouble remembering, it’s a problem.

A useful reminder for small business owners is that a temporary increase in the instant asset write-off during COVID-19 from $500 to $5,000 – is set to be lowered back to $1,000 beginning 17 March 2021.

This change will have a big impact on small-scale businesses.

Three significant changes are coming in 2021.

Here are some other important tax-related changes that took place recently or are on the agenda for 2021.

1. Do not forget that the minimum wage will increase by $1.10 and will increase to $18.90 to $20 per hour as of 1 April 2021. This could potentially affect your financial records and superannuation payments.
2. A new personal tax rate will be imposed on earnings of greater than $180,000. The new rate will take effect beginning on April 1, 2021. Tachibana claims that it is more likely to affect those who earn income through personal services, rather than those who hold investment accounts and are able to earn capital gains.
3. Take note that ACC Earners’ levy, that helps pay for the expenses of injuries suffered by employees will be kept at level until 2022 in order to help companies deal with the financial pressures of COVID-19. As of January 20, 2021 the levy is $1.39 100 cents (1.39 percent).

The foundational elements for EOFY the success of EOFY

Here are some helpful advice and dates from experts which small-business owners might wish to consider as they get their home organized for tax season.

1. Finalise your accounts

• Examine and approve your bills, invoices and expense claims.
• Follow up overdue accounts and outstanding transactions to get a view of the year’s total.
• Review debtors as at 31 March, and think about the possibility of writing off any bad debts in order to make them an end-of-year deduction.
• Note clients or suppliers who invoiced you by 31 March or before but won’t be invoiced until April. Take these costs into consideration as expenses for 2020-21.

2. Make sure you reconcile and clean up your files

• Combine bank accounts, tax year-end statements, and sales records, along with purchase and expense records.
• Check your bank accounts to ensure they are reconciled and check they match the balances on your bank statements.
• Make a profit and loss statement in order to calculate the annual profits your business earned.

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

• Check the information obtained during EOFY to review the current financial health of your business.
• Ask your payroll vendor to provide EOFY data when you can, to allow it to be analysed.
• Access Inland Revenue documents, including PAYE tax responsibilities and any KiwiSaver obligation for workers.

4. Manage your superannuation

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with the rate differing for each employee based on their salary and the length of tenure.
• Electronically file, as required in the event that your business pays at least $50,000 in ESCT tax and PAYE tax.

*For KiwiSaver, businesses need to pay ESCT for compulsory contribution from employers of up to 3 per cent but not on contributions taken from employee wages.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases during the year, along with expenses for improvements or maintenance in order to claim any EOFY refunds.
• Consider disposing of obsolete stock since provisions for obsolete stock or write-downs on stock aren’t typically allowed as tax deductions.
• It is recommended to pay within 63 calendar days following 31 March to obtain the benefit of a deduction for expenses related to employees like holiday pay, bonuses and long-service leave.
• If your income is substantially higher than last year, consider making an additional tax provisional payment to align your tax payments with turnover.

6. Maintain personal and financial finances distinct

There aren’t any tax deductions for personal expenses. you only get deductions for business expenses. However, you may be adding unnecessary compliance costs If your accountant must split up what’s tax deductible and what’s not.

Important tax dates in 2021

• 9 February 2021 2021 – 2020 tax year to be paid for those who don’t have a tax agent.
• 1 March 2021 - GST return and tax due at the end of January for companies that file every two months.
• 21 March Tax year 2020 return due for tax professionals (with a valid extension of time).
• 1 April 2021 - the new financial year starts on the island of New Zealand.
• 7 May 2021 - final proviso tax instalment due for the fiscal year 2020 and the last opportunity to make provisional tax payments.
• 7 May 2021 Tax return for the year’s end and due payment.

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