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

Utilizing intuitive accounting software and cloud storage options like Google Drive or Dropbox – in addition to tenancy administration software like myRent.co.nz can help save businesses time.

For small businesses such as retailers or restaurants It’s particularly important to monitor stock levels when the time for the end of the fiscal year draws near.

If you go to your accountant and are unable to remember the levels of your stocks from a couple of months ago this can lead to problems.

A good reminder for small entrepreneurs is that an increase in the instant asset write-off during COVID-19, from $500 to $5,000 – is being scaled back to $1,000 from 17 March 2021.

That’s a change that will be a major impact on small-scale enterprises.

Three important changes to 2021

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

1. Remember that the minimum wage is set to increase by $1.10 and will increase between $18.90 to $20 per hour as of 1 April 2021. This could impact your financial records as well as superannuation payments.
2. A new personal tax rate will be imposed on earnings of greater than $180,000. The new tax rate will be in effect from 1 April 2021. Tachibana claims that this is likely to be a problem for those who earn income by providing personal services as opposed to those who have investments and earn capital gains.
3. Make sure you are aware that ACC Earners’ levy, that covers the cost associated with employee injuries, will remain at the current levels until 2022 to assist businesses in coping the financial burdens of COVID-19. At the time of January 2021 the levy is $1.39 each $100 (1.39%).

The fundamental elements of EOFY success

Here are some information and dates from experts that small business owners might need to be aware of as they get their home up and running for tax time.

1. Finalise your accounts

• Check and approve your invoices, bills and expense claims.
• Check overdue accounts and outstanding transactions for an overview of the year’s total.
• Review the debtors’ accounts as of 31 March, and think about the possibility of writing off any bad debts so they are considered an expense at the end of the year.
• Include clients or suppliers that have invoiced you by 31 March or before but aren’t paid until after April. Consider treating these costs as expenses for 2020-21.

2. Make sure you reconcile and clean up your records

• Bank statements should be consolidated, income tax year-end and sales records, along with expense, and purchase records.
• Check your bank accounts to ensure they are reconciled and ensure that the balances are the same on your bank statements.
• Prepare your profit-and-loss statement to determine the amount of annual profit your business made.

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

• Review the information you have obtained during EOFY to review the financial health of your business.
• Contact your payroll provider to submit EOFY data as soon as you can to allow it to be analysed.
• Access Inland Revenue information, including PAYE tax obligations and KiwiSaver obligations for employees.

4. Manage superannuation

• Make sure you are aware of your employer’s superannuation contribution tax (ESCT) rates*, with rates different for each employee depending on their income and length of employment.
• Electronically file, as required in the event that your business pays $50,000 or more a year in ESCT and PAYE taxes.

*For KiwiSaver businesses, they have to pay ESCT on mandatory employee contributions up to 3% but not on contributions taken from wage payments to employees.

5. Maximise your tax refunds

• Keep track of all expenditures and asset purchases during the year, along with expenses for improvements or maintenance in order to claim any refunds from EOFY.
• You should consider disposing of old stock, as provisions for obsolete stock or stock write-downs aren’t generally allowed as tax deductions.
• Consider making payments within 63 days after 31 March in order to claim a deduction for employee-related expenses like bonus pay, holiday pay and long-service leaves.
• If your income is substantially higher than last year, you might want to make an additional provisional tax payment to align your tax obligations with turnover.

6. Maintain personal and financial finances separate

Tax deductions are not usually available for personal expenses. deductions for personal expenses; it’s just business expenses. You could be adding unnecessary compliance costs when your accountant is required to separate what’s tax-deductible and what’s not.

Some key 2021 tax dates

• 9 Feb 2021 2021 – 2020 tax year to be paid for those who don’t have a tax agent.
• 1 March 2021 GST return and tax due by January for businesses filing every two months.
• 31 March 2021 Tax year 2020 return due for clients of tax professionals (with an effective extension of the deadline).
• 1. April, 2021 The new fiscal year starts on the island of New Zealand.
• 7 May 2021 - final installment of the tax proviso for 2020’s fiscal year and the final opportunity to make provisional tax payments.
• 7 May 2021 GST tax return at the end of the year and due payment.

Note: Some dates may differ from the deadline, for instance the due date occurs on a weekend, or a public holiday.