Important dates and advice to help small businesses get ready for EOFY

The use of intuitive accounting software and cloud storage services like Google Drive or Dropbox – as well as tenancy management software such as myRent.co.nz can save businesses time.

For smaller businesses like restaurants or retail stores It’s crucial to track stock levels as the end of financial year draws near.

If you visit your accountant but aren’t able to recall the stock levels you had a couple of months ago it can cause problems.

A useful reminder for small entrepreneurs is that an increase in the write-off of assets in the moment during COVID-19 – from $500 up to $5,000 – is set to be lowered back to $1,000 from 17 March 2021.

It’s a change that could affect a lot of small-scale companies.

Three important changes to 2021

Here are some additional important tax-related reforms that have recently occurred or are in the works for 2021.

1. Do not forget that the minimum wage will rise by $1.10, taking it up from $18.90 to $20 per hour starting on April 1 2021. This could affect your financial records as well as superannuation payouts.
2. A new personal tax rate will be applied on income above $180,000. The new rate will apply from 1 April 2021. Tachibana believes this is more likely to be a problem for those who earn income through personal services, instead of those who own an investment and enjoy capital gains.
3. Make sure you are aware that ACC Earners’ levy, that helps pay for the expenses related to injuries sustained by employees, will remain at its present levels until 2022 to help businesses cope the financial burdens of COVID-19. In January 2021, the levy is $1.39 for every $100 (1.39 percent).

The foundational elements for EOFY achievement

Here are some key tips and dates from experts that small business owners might need to be aware of while putting their home up and running for tax time.

1. Finalise your accounts

• Make sure you approve the bills, invoices and expense claims.
• Follow up overdue accounts and outstanding transactions to gain a view of the entire year.
• Examine debtors at the time of 31 March and consider eliminating any outstanding debts to be considered an expense at the end of the year.
• Include clients or suppliers that have invoiced you on 31 March or before but won’t be reimbursed till after April. Take these costs into consideration as 2020-21 costs.

2. Clean up and reconcile your files

• Consolidate bank statements, income tax year-end and sales records, along with purchase and expense records.
• Consolidate your bank accounts and verify that they are in line with the balances on your bank statements.
• Create a profit and loss account to determine the amount of annual profits your business earned.

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

• Check the information collected during EOFY to determine the financial health of your business.
• 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 responsibilities and any KiwiSaver obligation for workers.

4. Manage superannuation

• Change your employer’s superannuation tax (ESCT) rates*, with the rate varying for each employee based on their income and length of service.
• You must file electronically, in accordance with the mandate by law, if your company pays more than $50,000 per year in ESCT and PAYE taxes.

*For KiwiSaver companies, they must pay ESCT on compulsory contribution from employers of up to 3 per cent, but not on contributions taken out of the employee’s wages.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, along with expenditure on improvements or upkeep to claim any EOFY refunds.
• Think about disposing of stock that is no longer needed because provisions for the disposal of obsolete stock or write-downs on stock aren’t generally allowed as tax deductions.
• It is recommended to pay within 63 days after 31 March in order to claim an employee-related expense deduction such as bonuses, holiday pay, and long-service leave.
• If your earnings are significantly higher than what you earned last year, consider making an additional voluntary tax payment to align your tax obligations with your earnings.

6. Maintain personal and financial finances distinct

Tax deductions are not usually available for personal expenses. deductions for personal expenses. it’s just business expenses. However, you may add unnecessary compliance charges in the event that your accountant needs to separate what’s tax-deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 - 2020 income tax due for those who do not have a tax representative.
• 1 March 2021 - GST return due and payment due for the end of January for companies that file every two months.
• The deadline for filing is 31 March Tax year 2020 return due for tax professionals (with a valid extension of time).
• 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 the final opportunity to make voluntary provisional tax payments.
• 7 May 2021 Tax return for the year’s end and payment due.

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