Key dates and tips to help small businesses prepare for EOFY

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

For small businesses such as restaurants or retail stores it is crucial to monitor the stock levels in advance of the end of financial year looms.

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

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

It’s a change that could have a big impact on small-scale companies.

3 significant changes for 2021

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

1. Don’t forget that your minimum wage will increase by $1.10, taking it to $18.90 to $20 an hour as of 1 April 2021. This could affect your financial records and superannuation benefits.
2. A new personal tax rate will be imposed to incomes of more than $180,000. The new tax rate will be in effect starting on April 1st, 2021. Tachibana states that it is more likely to be a problem for those who earn income from providing personal services, rather than those who hold investments and earn capital gains.
3. Take note that ACC Earners’ levy, that covers the cost related to injuries sustained by employees, will be kept at level until 2022 in order to assist businesses in coping with the financial burdens of COVID-19. In January 2021, the levy was $1.39 100 cents (1.39%).

The fundamental elements of EOFY success

Here are some helpful guidelines and dates from professionals which small-business owners might want to keep in mind when getting their house 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 to gain an overview of the entire year.
• Review debtors as at 31 March. Consider the possibility of writing off any bad debts in order to make them a year-end deduction.
• You should list clients or suppliers who have paid you invoices on the 31st of March or earlier but won’t be due until the end of April. Take these costs into consideration as 2020-21 costs.

2. Make sure you reconcile and clean up your files

• Bank statements should be consolidated, year-end income tax records, plus sales, purchase and expense records.
• Reconcile your bank accounts , and check they match the balances from your bank statements.
• Make a profit and loss statement in order to determine the amount of annual profits your business earned.

3. Re-read the information you receive from your payroll vendor as well as Inland Revenue

• Review the information you have obtained during EOFY to evaluate the financial position of your business.
• Contact your payroll provider to provide EOFY data as early as possible so it can be analysed.
• Access to Inland Revenue records, including PAYE tax obligations as well as any KiwiSaver obligation for workers.

4. Superannuation management

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the tax rate differing for each employee based on their income and length of their tenure.
• You must file electronically, in accordance with the mandate, if your business pays $50,000 or more a year in PAYE tax and ESCT.

*For KiwiSaver businesses, they need to pay ESCT on mandatory contribution from employers of up to 3 per cent but not on contributions taken from employee wages.

5. Maximise your tax refunds

• Log expenses and asset purchases during the year, plus the cost of improvements or maintenance, to claim any EOFY refunds.
• You should consider disposing of old stock because provisions for the disposal of obsolete stock or stock write-downs are not usually tax-deductible.
• Make sure to make payments within 63 days after 31 March in order to claim the benefit of a deduction for expenses related to employees such as holiday pay, bonuses and long-service leaves.
• If your income is more than it was last year, think about making an additional voluntary tax payment to align your tax payments with turnover.

6. Make sure that personal and business finances are distinct

It is not common to get tax deductions for personal expenses; it’s just business expenses. You could be racking up unnecessary compliance costs If your accountant must divide what is tax-deductible and what’s not.

Some key 2021 tax dates

• 9 Feb 2021 Income tax for 2020 due for those who do not have a tax professional.
• 1 March 2021 GST return and due by January for businesses filing every two months.
• The deadline for filing is 31 March - 2020 income tax return due for clients of tax agents (with an effective extension of the deadline).
• 1 April 2021 The new financial year starts with New Zealand.
• 7 May 2021 Final installment of the tax proviso for the financial year 2020 and last chance to make voluntary provisional tax payments.
• 7 May 2021 - end-of-year GST return and payment due.

Notice: Some dates may vary from the official date, for example, the due date is a weekend or public holiday.