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

Utilizing intuitive accounting software and cloud storage services like Google Drive or Dropbox – along with tenancy management software like myRent.co.nz can save businesses time.

Smaller companies, like restaurants or retail stores It’s particularly important to track stock levels as the time for the end of the fiscal year draws near.

If you go to your accountant and are unable to remember your stock levels from the last few months this can lead to problems.

A great reminder for small entrepreneurs is that a temporary increase in the write-off of assets in the moment during COVID-19 from $500 to $5,000 – will be increased back to $1,000 as of 17 March 2021.

This is a change that will be a major impact on small businesses.

3 important changes in 2021

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

1. Do not forget that the minimum wage will rise by $1.10 to increase it up from $18.90 to $20 per hour starting on April 1 2021. It could affect your financial records as well as superannuation benefits.
2. A new personal tax rate will be applied on earnings of greater than $180,000. The new tax rate is effective from 1 April 2021. Tachibana claims that it is more likely to affect those who earn income by providing personal services rather than those who hold an investment and enjoy capital gains.
3. Be aware that the ACC Earners’ levy, that helps pay for the expenses that are incurred by injuries to employees, will be kept at their current levels until 2022, to assist businesses in coping with the financial burdens of COVID-19. As at January 2021, the levy is $1.39 100 cents (1.39 percent).

The fundamental elements of EOFY successful EOFY

Here are some key tips and dates from experts that small-business owners may wish to consider as they get their home ready for tax time.

1. Finalise your accounts

• Review and approve your bills, invoices and expense claims.
• Follow up overdue accounts as well as outstanding transactions to get an overview of the year’s total.
• Re-evaluate debtors on 31 March. Consider the possibility of writing off any bad debts in order to make them an end-of-year deduction.
• You should list clients or suppliers who have invoiced you on 31 March or before, but who won’t be reimbursed till after April. You might want to consider treating these costs as expenses for 2020-21.

2. Clean up and reconcile your files

• Bank statements should be consolidated, year-end income tax documents, as well as sales, expense, and purchase records.
• Check your bank accounts to ensure they are reconciled and verify that they are in line with the balances from your bank statement.
• Prepare your profit and loss statement to work out how much annual revenue your business has earned.

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

• Assess information taken during EOFY to evaluate the current financial position of your business.
• Contact your payroll provider to send EOFY details in the earliest time possible to allow it to be analysed.
• Access Inland Revenue records, including PAYE tax obligations and 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 tax rate different for each employee depending on their salary and the length of service.
• File electronically, as mandated when your business is paying $50,000 or more a year in ESCT and PAYE taxes.

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

5. Maximise your tax refunds

• Record all expenses and purchases of assets in the course of the year, and expenditure on improvements or upkeep, to claim any EOFY refunds.
• You should consider disposing of old stock, as provisions for obsolete stock or stock write-downs aren’t generally allowed as tax deductions.
• Consider making payments within 63 calendar days following 31 March to get the benefit of a deduction for expenses related to employees like bonuses, holiday pay, or long-service leaves.
• If your income is significantly greater than the previous year, you may want to consider an additional tax provisional payment to make sure your tax payments are aligned with your turnover.

6. Make sure that personal and business finances are distinct

Tax deductions are not usually available for personal expenses. deductions for personal expenditure; you only get deductions for business expenses, you could be racking up unnecessary compliance costs when your accountant is required to separate what’s tax-deductible and what’s not.

Some key 2021 tax dates

• 9 February 2021 - 2020 income tax to be paid for those who don’t have a tax professional.
• 1 March 2021 GST return due and payment due at the end of January for companies that file every two months.
• 30 March 2021 - 2020 income tax return due for tax agents (with an extension valid for the deadline).
• 1. April, 2021 the start of the new financial year begins from New Zealand.
• 7 May 2021 Final installment of the tax proviso for 2020’s fiscal year and last chance to make provisional tax payments.
• 7 May 2021 - end-of-year GST return and due payment.

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