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

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

Smaller companies, like retailers or restaurants, it’s especially important to track stock levels as the closing date of the financial year approaches.

If you visit your accountant but aren’t able to recall your stock levels from the last few months, that creates difficulties.

A good reminder for smaller entrepreneurs is that a temporary increase in the asset write-off in an instant during COVID-19 – from $500 to $5,000 – will be increased back to $1,000 starting 17 March 2021.

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

3 significant changes for 2021

These are just a few of the important tax-related changes that occurred recently or are in the works for 2021.

1. Do not forget that the minimum wage is set to increase by $1.10 to increase it from $18.90 to $20 per hour as of 1 April 2021. This could potentially affect your financial records as well as superannuation benefits.
2. A new personal tax rate is set to apply on earnings of greater than $180,000. The new rate will apply beginning on April 1, 2021. Tachibana states that it is more likely to be a problem for those who earn income from providing personal services, instead of those who own investments and earn capital gains.
3. It is important to be aware of the ACC Earners’ levy, which helps cover the costs related to injuries sustained by employees, will be kept at present levels until 2022 to help companies deal the financial burdens of COVID-19. As of January 20, 2021 the levy stood at $1.39 each $100 (1.39 percent).

The foundational elements for EOFY achievement

Here are some information and dates from experts who small business owners might want to keep in mind as they get their home organized for tax season.

1. Finalise your accounts

• Review and approve your bills, invoices and expense claims.
• Follow up overdue accounts and outstanding transactions to gain an overview of the year in its entirety.
• Review debtors as at 31 March and consider writing off any bad debts in order to make them an expense at the end of the year.
• Include clients or suppliers that have been invoiced on or before 31 March or earlier but won’t be reimbursed till after April. You might want to consider treating these costs as expenses for 2020-21.

2. Clean up and reconcile your records

• Bank statements should be consolidated, tax year-end statements, records, plus sales, purchase and expense records.
• Reconcile your bank accounts and make sure they are in balance with the amounts from your bank statements.
• Make a profit and loss statement in order to calculate the annual profit your business made.

3. Examine the information from your payroll vendor and Inland Revenue

• Examine the data taken during EOFY to determine the financial health of your business.
• Request your payroll provider to supply EOFY information as soon as you can so it can be analysed.
• Access to Inland Revenue records, which include PAYE tax obligations as well as any KiwiSaver duties for staff.

4. Manage superannuation

• Update your employer superannuation contribution tax (ESCT) rates*, with the rates differing for each employee based on their salary and the length of employment.
• File electronically, as mandated by law, if your company pays $50,000 or more a year in ESCT tax and PAYE tax.

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

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases during the year, along with expenditure on improvements or upkeep for claiming any refunds from EOFY.
• Consider disposing of obsolete stock in light of the fact that provisions for old stock or write-downs on stock aren’t generally allowed as tax deductions.
• Make sure to make payments within 63-days after 31 March in order to claim a deduction for employee-related expenses such as holiday pay, bonuses and long-service leave.
• If your earnings are significantly higher than what you earned last year, you may want to consider an additional voluntary tax payment to ensure that your tax payment is aligned with your earnings.

6. Make sure that personal and business finances are distinct

Tax deductions are not usually available for personal expenses. deductions for personal expenditure; only business expenses. You could add unnecessary compliance charges If your accountant must split up what’s tax deductible and the rest of it.

Tax dates for 2021 are important.

• 9 February 2021 2021 – 2020 tax year to be paid for those who don’t have a tax agent.
• 1 March 2021 GST return due and payment due at the end of January for those who file their GST returns every two months.
• 21 March - 2020 income tax return due for clients of tax agents (with a valid extension of time).
• 1 April 2021 the start of the new financial year begins in New Zealand.
• 7 May 2021 - final installment of tax provisional due for the fiscal year 2020 and the last opportunity to make voluntary tax payments.
• 7 May 2021 GST tax return at the end of the year and due payment.

Notice: Some dates may vary from the official deadline, such as when a due date falls on a holiday weekend or public holiday.