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

Utilizing intuitive accounting software as well as cloud storage options like Google Drive or Dropbox – as well as tenancy management software like myRent.co.nz - could save businesses time.

For smaller businesses like restaurants and retailers It’s crucial to monitor stock levels when the end of financial year is near.

If you visit your accountant and are unable to remember your stock level from a couple of months ago and you’re having trouble remembering, it’s a problem.

A great reminder for small entrepreneurs is that a temporary increase in the immediate asset write-off period during COVID-19 – from $500 to $5,000 – will be scaled back to $1,000 from 17 March 2021.

That’s a change that will have a significant impact on small-scale businesses.

3 important changes in 2021

These are just a few of the important tax-related changes that have recently occurred or are planned for 2021.

1. Remember that the minimum wage will rise by $1.10 and will increase up from $18.90 to $20 an hour on April 1, 2021. This could potentially affect your financial records as well as superannuation payouts.
2. A new 39% personal tax rate will apply to incomes of more than $180,000. The new tax rate will be in effect from April 1, 2021. Tachibana says this is likely to be a problem for those who earn income by providing personal services rather than those who hold an investment and enjoy capital gains.
3. Take note that ACC Earners’ levy, which helps cover the costs associated with employee injuries, will be kept at level until 2022 in order to help businesses deal the financial burdens of COVID-19. At the time of January 2021 the levy is $1.39 each $100 (1.39 percent).

The essential elements to EOFY the success of EOFY

Here are some key information and dates from experts that small-business owners may need to be aware of to ensure their house is organized for tax season.

1. Finalise your accounts

• Make sure you approve the invoices, bills and expense claims.
• Monitor accounts that are due and outstanding transactions for an overview of the year in its entirety.
• Review debtors as at 31 March, and think about the possibility of writing off any bad debts to be considered an end-of-year deduction.
• Note clients or suppliers who invoiced you on 31 March or earlier but aren’t invoiced until April. Take these costs into consideration as expenses for 2020-21.

2. Make sure you reconcile and clean up your records

• Consolidate bank statements, year-end income tax documents, as well as sales, expense and purchase records.
• Check your bank accounts to ensure they are reconciled and check they match the balances from your bank statement.
• Make a profit and loss statement in order to determine the amount of annual profit your business made.

3. Review data from your payroll provider and Inland Revenue

• Review the information you have obtained during EOFY to evaluate the current financial condition of your company.
• Contact your payroll provider to provide EOFY data as soon as you can so that it can be analyzed.
• Access to Inland Revenue records, including PAYE tax obligations as well as any KiwiSaver duties for staff.

4. Superannuation management

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the rate varying for each employee based on their salary and the length of service.
• File electronically, as mandated, if your business pays $50k or more in PAYE tax and ESCT.

*For KiwiSaver businesses, they need to pay ESCT for compulsory employers’ contributions of 3 percent but not on contributions taken out of the employee’s wages.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases during the year, plus the cost of improvements or maintenance in order to claim any refunds from EOFY.
• Consider disposing of obsolete stock in light of the fact that provisions for old stock or write-downs on stock aren’t usually tax-deductible.
• It is recommended to pay within 63 calendar days following 31 March to obtain an employee-related expense deduction such as bonuses, holiday pay, and long-service leave.
• If your earnings are significantly more than it was last year, consider making an additional voluntary tax payment to ensure that your tax payment is aligned with your turnover.

6. Keep business and personal finances separated

It is not common to get tax deductions for personal expenditure; it’s only your business expenses, you could be racking up unnecessary compliance costs when your accountant is required to divide what is tax-deductible and the rest of it.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 2021 – 2020 tax year to be paid for those who don’t have a tax representative.
• 1 March 2021 GST return and due by the end of January for businesses filing every two months.
• 21 March 2021 – 2020 tax return due for tax agents (with an extended the deadline).
• 1 April 2021 - the new financial year starts on the island of 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 GST tax return at the end of the year and payment due.

NOTE: Some dates may be different from the official deadline, for instance when a due date occurs on a weekend, or a public holiday.