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

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

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

If you go to your accountant and can’t remember your stock levels from just a few months ago this can lead to problems.

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

This is a change that will have a big impact on small-scale enterprises.

Three significant changes are coming in 2021.

Here are some additional important tax-related changes that took place recently or are on the agenda for 2021.

1. Don’t forget that the minimum wage will increase by $1.10 increasing it to $18.90 to $20 per hour from April 1 2021. This could potentially affect your financial records and superannuation benefits.
2. A new personal tax rate is set to apply on earnings of greater than $180,000. The new rate will apply from 1 April 2021. Tachibana states that it is more likely to be a problem for those who earn income by providing personal services rather than those who hold the shares and make capital gains.
3. It is important to be aware of the ACC Earners’ levy, that covers the cost associated with employee injuries, will remain at the level until 2022 in order to assist businesses in coping with the financial pressures of COVID-19. In January 2021, the levy was $1.39 for every $100 (1.39%).

The fundamental elements of EOFY the success of EOFY

Here are some tips and dates from experts who small business owners might wish to consider while putting their home organized for tax season.

1. Finalise your accounts

• Examine and approve your invoices, bills and expense claims.
• Review accounts with a late payment as well as outstanding transactions to get an overview of the year’s total.
• Review the debtors’ accounts as of 31 March. Consider the possibility of writing off any bad debts to be considered 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. Take these costs into consideration as 2020-21 expenses.

2. Make sure you reconcile and clean up your files

• Consolidate bank statements, tax year-end statements, records, plus sales, purchase and expense records.
• Reconcile your bank accounts and verify that they are in line with the balances on your bank statements.
• Make a profit and loss statement in order to work out how much annual revenue your business has earned.

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

• Check the information that you have collected during EOFY to review the current financial situation of your business.
• Request your payroll provider to supply EOFY information as soon as you can so that it can be analyzed.
• Access to Inland Revenue records, which include PAYE tax obligations and KiwiSaver obligation for workers.

4. Manage superannuation

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the rates different for each employee depending on their salary and the length of tenure.
• Filing electronically, as required when your business is paying $50,000 or more a year in ESCT and PAYE taxes.

*For KiwiSaver, businesses need to pay ESCT on mandatory contribution from employers of up to 3 per cent but not on contributions that are deducted from wage payments to employees.

5. Maximise your tax refunds

• Log expenses and asset purchases in the course of the year, and the cost of improvements or maintenance to claim any refunds from EOFY.
• Think about disposing of stock that is no longer needed, as provisions for obsolete stock or write-downs on stock aren’t generally allowed as tax deductions.
• Make sure to make payments within 63 days after 31 March to get an employee-related expense deduction such as bonus pay, holiday pay and long-service leave.
• If your earnings are significantly more than it was last year, you may want to consider an additional provisional tax payment to align your tax payments to your income.

6. Separate personal and business finances separated

You generally don’t get tax deductions on personal expenses. If only business expenses, you could be racking up unnecessary compliance costs if your accountant has to determine what tax-deductible and what’s not.

Some key 2021 tax dates

• 9 Feb 2021 - 2020 income tax to be paid for those who don’t have a tax professional.
• 1 March 2021 - GST return and payment due by the end of January for those who file their GST returns every two months.
• 31 March 2021 - 2020 income tax return due for clients of tax professionals (with an effective extension of the deadline).
• 1 April 2021 The new financial year starts from New Zealand.
• 7 May 2021 - final provisional tax instalment due for the financial year 2020 and the last opportunity to make voluntary tax payments.
• 7 May 2021 Tax return for the year’s end and payment due.

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