Key dates and advice to help small businesses prepare for EOFY
Utilizing intuitive accounting software and cloud storage services like Google Drive or Dropbox – and tenancy management software such as myRent.co.nz can save businesses time.
Smaller companies, like restaurants or retailers, it’s especially important to track stock levels as the end of financial year approaches.
If you go to your accountant and are unable to remember the stock levels you had 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 of the immediate asset write-off period during COVID-19 – from $500 up to $5,000 – is set to be lowered back to $1,000 as of 17 March 2021.
That’s a change that will have a significant impact on small-scale businesses.
3 significant changes for 2021
Here are some other significant tax-related changes which have occurred recently or are planned for 2021.
- Don’t forget that the minimum wage will increase by $1.10 to increase it between $18.90 to $20 an hour starting on April 1 2021. This could impact your financial records and superannuation payouts.
- A new personal tax rate will be applied for incomes above $180,000. The new rate will take effect from 1 April 2021. Tachibana believes it is more likely to affect those who earn income from personal service, instead of those who own the shares and make capital gains.
- Make sure you are aware that ACC Earners’ levy, that covers the cost related to injuries sustained by employees, will remain at level until 2022 in order to help companies deal with the financial strains of COVID-19. As at January 2021, the levy is $1.39 for every $100 (1.39 percent).
The foundational elements for EOFY the success of EOFY
Here are some important guidelines and dates from professionals that small business owners might wish to consider as they get their home in order for tax time.
1. Finalise your accounts
- Make sure you approve the bills, invoices and expense claims.
- Monitor accounts that are due and outstanding transactions to get a view of the entire year.
- Review debtors as at 31 March. You may also consider writing off any bad debts so that they can be counted as an expense at the end of the year.
- Include clients or suppliers that have been invoiced on or before 31 March or earlier but aren’t invoiced until April. Think about treating these expenses as expenses for 2020-21.
2. Clean up and reconcile your records
- Combine bank accounts, tax year-end statements, documents, as well as sales, expense and purchase records.
- Reconcile your bank accounts , and ensure that the balances are the same from your bank statement.
- Make a profit and loss statement in order to work out how much annual profits your business earned.
3. Re-read the information you receive from your payroll vendor and Inland Revenue
- Review the information you have taken during EOFY to evaluate the financial position of your business.
- Ask your payroll vendor to send EOFY details when you can, so it can be analysed.
- Access Inland Revenue information, including PAYE tax obligations as well as any KiwiSaver obligation for workers.
4. Superannuation management
- Change your employer’s superannuation tax (ESCT) rates*, with the rates different for each employee depending on their salary and the length of tenure.
- Electronically file, as required when your business is paying at least $50,000 in ESCT tax and PAYE tax.
*For KiwiSaver companies, they must pay ESCT on compulsory employer contributions of 3% but not on contributions deducted from wage payments to employees.
5. Maximise your tax refunds
- Log expenses and asset purchases throughout the year, as well as spending on repairs or maintenance, to claim any EOFY refunds.
- Take into consideration disposing of stocks that are no longer in use since provisions for obsolete stock or write-downs on stock aren’t usually tax-deductible.
- Consider making payments within 63 calendar days following 31 March to get the benefit of a deduction for expenses related to employees like bonus pay, holiday pay and long-service leaves.
- If your earnings are significantly greater than the previous year, consider making an additional voluntary tax payment to align your tax obligations with your earnings.
6. Separate personal and business finances Separately
Tax deductions are not usually available for personal expenses. deductions for personal expenses; it’s only your company expenses. But you might be adding unnecessary compliance costs if your accountant has to divide what is tax-deductible and what’s not.
Some key 2021 tax dates
- 9 February 2021 2021 – 2020 tax year due for those who do not have a tax professional.
- 1 March 2021 GST return and tax due by January for those who file their GST returns every two months.
- 31 March 2021 Tax year 2020 return due for clients of tax agents (with an extension valid for the deadline).
- 1 April 2021 the start of 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 last chance to make voluntary provisional tax payments.
- 7 May 2021 - end-of-year GST return and due payment.
Notice: Some dates may differ from the official deadline, such as when a due date occurs on a weekend, or a public holiday.
