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

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 and retailers it is crucial to track stock levels as the close of the financial year approaches.

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

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 scaled back to $1,000 beginning 17 March 2021.

This change will be a major impact on small-scale enterprises.

Three significant changes are coming in 2021.

These are just a few of the significant tax-related changes that have recently occurred or are scheduled for 2021.

1. Don’t forget that the minimum wage will rise by $1.10 to increase it between $18.90 to $20 an hour on April 1, 2021. It could affect your financial records as well as superannuation benefits.
2. A new personal tax rate will be imposed on income above $180,000. The new tax rate is effective from 1 April 2021. Tachibana believes it is more likely to affect those who earn income by providing personal services rather than those who hold an investment and enjoy capital gains.
3. Take note that ACC Earners’ levy, that covers the cost of injuries suffered by employees will remain at the present levels until 2022 to help companies deal the financial burdens of COVID-19. At the time of January 2021 the levy stood at $1.39 per $100 (1.39%).

The essential elements to EOFY success

Here are some helpful information and dates from experts that small-business owners may need to be aware of as they get their home organized for tax season.

1. Finalise your accounts

• Examine and approve your bills, invoices and expense claims.
• Review accounts with a late payment as well as outstanding transactions to get a view of the entire year.
• Review debtors as at 31 March. Consider writing off any bad debts in order to make them an annual deduction at the end of the year.
• List suppliers or clients who’ve paid you invoices on the 31st of March or before but aren’t reimbursed till after April. Think about treating these expenses as 2020-21 expenses.

2. Make sure you reconcile and clean up your records

• Combine bank accounts, income tax year-end documents, as well as sales, purchase and expense records.
• Consolidate your bank accounts and ensure that the balances are the same from your bank statement.
• Prepare your profit-and-loss statement to calculate the annual profit your business made.

3. Review data from your payroll provider and Inland Revenue

• Check the information that you have collected during EOFY to determine the financial condition of your company.
• Ask your payroll vendor to submit EOFY data as soon as you can so it can be analysed.
• Access Inland Revenue documents, including PAYE tax obligations as well as any KiwiSaver obligation for workers.

4. Superannuation management

• Update your employer superannuation contribution tax (ESCT) rates*, with rates dependent on their salary and the length of employment.
• Electronically file, as required in the event that your business pays $50,000 or more a year in tax on PAYE and ESCT.

*For KiwiSaver companies, they must pay ESCT on compulsory employers’ contributions of 3 percent but not on contributions that are deducted from the employee’s wages.

5. Maximise your tax refunds

• Log expenses and asset purchases during the year, plus expenses for improvements or maintenance for claiming any refunds from EOFY.
• You should consider disposing of old stock in light of the fact that provisions for old stock or stock write-downs aren’t generally allowed as tax deductions.
• You should consider making your payments within 63 days of 31 March to get the benefit of a deduction for expenses related to employees such as bonuses, holiday pay, and long-service leaves.
• If your earnings are significantly higher than last year, you might want to make an additional provisional tax payment to align your tax obligations with your turnover.

6. Maintain personal and financial finances separated

There aren’t any tax deductions for personal expenses; only business expenses. You could be racking up unnecessary compliance costs in the event that your accountant needs to separate what’s tax-deductible and what’s not.

Tax dates for 2021 are important.

• 9 February 2021 Income tax for 2020 due for those who do not have a tax advisor.
• 1 March 2021 GST return due and payment due at the end of January for companies that file every two months.
• The deadline for filing is 31 March Tax year 2020 return due for clients of tax professionals (with an extended the deadline).
• 1 April 2021 The new financial year begins in New Zealand.
• 7 May 2021 - final installment of tax provisional due for the financial year 2020 and last chance to make voluntary tax payments.
• 7 May 2021 - end-of-year GST return and payment due.

Notice: Some dates may differ from the official deadline, for example when a due date occurs on a weekend, or a public holiday.