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

Using intuitive accounting software and cloud storage such as Google Drive or Dropbox – along with tenancy management software like myRent.co.nz - could save businesses time.

For smaller businesses like restaurants or retail stores, it’s especially important to monitor the stock levels in advance of the time for the end of the fiscal year is near.

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

A good reminder for smaller business owners is that an increase in the instant asset write-off during COVID-19 from $500 to $5,000 – will be scaled back to $1,000 as of 17 March 2021.

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

3 important changes in 2021

Below are other important tax-related reforms which have occurred recently or are on the agenda for 2021.

1. Do not forget that the minimum wage will increase by $1.10 and will increase from $18.90 to $20 per hour starting on April 1 2021. This could affect your financial records as well as superannuation payments.
2. A new personal tax rate will be applied for incomes above $180,000. The new tax rate is effective from April 1, 2021. Tachibana claims that this is likely to affect those who earn income by providing personal services instead of those who own the shares and make capital gains.
3. Take note that ACC Earners’ levy, that covers the cost of injuries suffered by employees will remain at its their current levels until 2022, to help businesses deal with the financial strains of COVID-19. At the time of January 2021 the levy stood at $1.39 each $100 (1.39 percent).

The essential elements to EOFY success

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

1. Finalise your accounts

• Review and approve your bills, invoices and expense claims.
• Monitor accounts that are due and outstanding transactions to gain an overview of the year’s total.
• Re-evaluate debtors on 31 March, and think about writing off any bad debts so they are considered a year-end deduction.
• Note clients or suppliers who invoiced you on 31 March or before but won’t be invoiced until April. Think about treating these expenses as expenses for 2020-21.

2. Clean up and reconcile your records

• Combine bank accounts, year-end income tax records, sales, expense, and purchase records.
• Reconcile your bank accounts , and verify that they are in line with the balances from your bank statements.
• Prepare your profit and loss statement to work out how much profits your company made annually.

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

• Review the information you have obtained during EOFY to determine the current financial position of your business.
• Get your payroll company to send EOFY details in the earliest time possible to allow it to be analysed.
• Access Inland Revenue information, including PAYE tax obligations as well as any KiwiSaver obligation for workers.

4. Manage superannuation

• Update your employer superannuation contribution tax (ESCT) rates*, with the rates different for each employee depending on their income and length of employment.
• Filing electronically, as required in the event that your business pays $50,000 or more a year in ESCT and PAYE taxes.

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

5. Maximise your tax refunds

• Record all expenses and purchases of assets throughout the year, as well as spending on repairs or maintenance, to claim any refunds from EOFY.
• Take into consideration disposing of stocks that are no longer in use 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 calendar days following 31 March to obtain an employee-related expense deduction like bonuses, holiday pay, and long-service leave.
• If your earnings are significantly higher than last year, think about making an additional voluntary tax payment to make sure your tax payments are aligned with turnover.

6. Maintain personal and financial finances separated

There aren’t any tax deductions on personal expenses. If you only get deductions for business expenses, you could be incurring unnecessary compliance costs If your accountant must separate what’s tax-deductible and what’s not.

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 Income tax for 2020 to be paid for those who don’t have a tax advisor.
• 1 March 2021 - GST return and due for the end of January for businesses that file each two months.
• 21 March 2020 income tax return due for tax agents (with an effective extension of the deadline).
• 1 April 2021 the start of the new financial year begins on the island of New Zealand.
• 7 May 2021 - final proviso tax instalment due for 2020’s fiscal year and last chance to make tax provisional voluntary payments.
• 7 May 2021 - end-of-year GST return and due payment.

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