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

Utilizing intuitive accounting software as well as cloud storage such as Google Drive or Dropbox – in addition to tenancy administration software such as myRent.co.nz can help save businesses time.

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

If you go to your accountant and are unable to remember your stock levels from the last few months and you’re having trouble remembering, it’s a problem.

A great reminder for small entrepreneurs is that a temporary 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.

It’s a change that could have a significant impact on small-scale companies.

Three significant changes are coming in 2021.

Below are other important tax-related tax changes that occurred recently or are scheduled for 2021.

1. Don’t forget that your minimum wage will increase by $1.10 increasing it between $18.90 to $20 an hour from April 1 2021. This could potentially affect your financial records and superannuation payment.
2. A new 39% personal tax rate will be imposed for incomes above $180,000. The new rate will apply from April 1, 2021. Tachibana says this will more likely be a problem for those who earn income from 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 related to injuries sustained by employees, will remain at the current levels until 2022 to assist businesses in coping with the financial strains of COVID-19. At the time of January 2021 the levy is $1.39 for every $100 (1.39 percent).

The fundamental elements of EOFY successful EOFY

Here are some key tips and dates from experts which small-business owners might want to keep in mind when getting their house up and running for tax time.

1. Finalise your accounts

• Check and approve your bills, invoices and expense claims.
• Review accounts with a late payment and outstanding transactions for a view of the year in its entirety.
• Re-evaluate debtors on 31 March. Consider writing off any bad debts to be considered an end-of-year deduction.
• List suppliers or clients who’ve been invoiced on or before 31 March or before, but who won’t be due until the end of April. Think about treating these expenses as 2020-21 expenses.

2. Clean up and reconcile your records

• Combine bank accounts, income tax year-end records, sales, expense and purchase records.
• Reconcile your bank accounts and check they match the balances from your bank statement.
• Create a profit and loss account to determine the amount of annual revenue your business has earned.

3. Re-read the information you receive from your payroll vendor and Inland Revenue

• Review the information you have taken during EOFY to review the current financial position of your business.
• Ask your payroll vendor to send EOFY details as early as possible to allow it to be analysed.
• Access Inland Revenue information, including PAYE tax responsibilities and any KiwiSaver duties for staff.

4. Superannuation management

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with rates varying for each employee based on their income and length of their tenure.
• File electronically, as mandated by law, if your company pays at least $50,000 in ESCT and PAYE taxes.

*For KiwiSaver businesses, they have to pay ESCT for compulsory employee contributions up to 3% but not on contributions deducted from wage payments to employees.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases throughout the year, as well as expenses for improvements or maintenance, to claim any refunds from EOFY.
• Take into consideration disposing of stocks that are no longer in use because provisions for the disposal of obsolete stock or write-downs on stock aren’t generally allowed as tax deductions.
• Consider making payments within 63 calendar days following 31 March, to receive the benefit of a deduction for expenses related to employees like bonuses, holiday pay, and long-service leaves.
• If your income is substantially greater than the previous year, you might want to make an additional provisional tax payment to ensure that your tax payment is aligned to your income.

6. Maintain personal and financial finances separated

It is not common to get tax deductions for personal expenses. only business expenses. You could add unnecessary compliance charges if your accountant has to separate what’s tax-deductible and the rest of it.

Some key 2021 tax dates

• 9 Feb 2021 Tax on income for 2020 due for those who do not have a tax advisor.
• 1 March 2021 - GST return and tax due by the end of January for businesses filing every two months.
• 21 March Tax year 2020 return due for clients of tax agents (with a valid extension of the deadline).
• 1 April 2021 - the new financial year starts on the island of New Zealand.
• 7 May 2021 Final provisional tax instalment due for 2020’s fiscal year and last chance to make voluntary provisional tax payments.
• 7 May 2021 Tax return for the year’s end and due payment.

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