Important dates and tips 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 – and tenancy management software like myRent.co.nz can save businesses time.

Smaller businesses, such as restaurants or retail stores, it’s especially important to keep track of stock levels as the time for the end of the fiscal year approaches.

If you go to your accountant and can’t remember the stock levels you had the last few months and you’re having trouble remembering, it’s a problem.

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

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

Three significant changes are coming in 2021.

These are just a few of the significant tax-related changes that took place recently or are scheduled for 2021.

1. Don’t forget that the minimum wage will increase by $1.10, taking it from $18.90 to $20 an hour starting on April 1 2021. It could affect your financial records and superannuation payment.
2. A new personal tax rate will apply on earnings of greater than $180,000. The new tax rate will be in effect from 1 April 2021. Tachibana states that this is more likely to impact those who make a living through personal services, as opposed to those who have investment accounts and are able to earn capital gains.
3. Be aware that the ACC Earners’ levy, which funds the costs related to injuries sustained by employees, will remain at level until 2022 in order to help businesses cope with the financial strains of COVID-19. At the time of January 2021 the levy is $1.39 100 cents (1.39%).

The essential elements to EOFY successful EOFY

Here are some guidelines and dates from professionals that small-business owners may want to keep in mind to ensure their house is up and running for tax time.

1. Finalise your accounts

• Examine and approve your bills, invoices and expense claims.
• Check overdue accounts and outstanding transactions for an overview of the year’s total.
• Examine debtors at the time of 31 March and consider writing off any bad debts in order to make them an expense at the end of the year.
• List suppliers or clients who’ve been invoiced on or before 31 March or before, but who won’t be invoiced until April. You might want to consider treating these costs as expenses for 2020-21.

2. Make sure you reconcile and clean up your files

• Incorporate bank statement statements and tax year-end statements, records, plus sales, expenses, and purchase records.
• Check your bank accounts to ensure they are reconciled and make sure they are in balance with the amounts from your bank statements.
• Make a profit and loss statement in order to determine how much profits your company made annually.

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

• Assess information that you have collected during EOFY to determine the financial condition of your company.
• Request your payroll provider to provide EOFY data in the earliest time possible so that it can be reviewed.
• Access Inland Revenue records, including PAYE tax obligations, as well as KiwiSaver obligations for employees.

4. Manage your superannuation

• Update your employer superannuation contribution tax (ESCT) rates*, with rates varying for each employee based on their earnings and length of employment.
• File electronically, as mandated, if your business pays at least $50,000 in ESCT tax and PAYE tax.

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

5. Maximise your tax refunds

• Log expenses and asset purchases in the course of the year, and spending on repairs or maintenance to claim any refunds from EOFY.
• Think about disposing of stock that is no longer needed, as provisions for obsolete stock or stock write-downs are not typically tax-deductible.
• You should consider making your payments within 63 days after 31 March to obtain a deduction for employee-related expenses like bonuses, holiday pay, and long-service leaves.
• If your earnings are significantly higher than what you earned last year, think about making an additional tax provisional payment to ensure that your tax payment is aligned with your earnings.

6. Maintain personal and financial finances distinct

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

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 - 2020 income tax due for those who don’t have a tax agent.
• 1 March 2021 - GST return and due by January for companies that file every two months.
• 30 March 2021 Tax year 2020 return due for tax professionals (with an extension valid for the deadline).
• 1 April 2021 the start of the new financial year starts in New Zealand.
• 7 May 2021 Final provisional tax instalment due for 2020’s fiscal year and last chance to make provisional tax payments.
• 7 May 2021 Tax return for the year’s end and due payment.

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