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

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

For smaller businesses like restaurants or retailers It’s particularly important to monitor stock levels when the end of financial year approaches.

If you go to your accountant and are unable to remember your stock level from a couple of months ago, that creates difficulties.

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

This change will have a big impact on small-scale enterprises.

Three significant changes are coming in 2021.

Here are some additional important tax-related reforms that occurred recently or are planned for 2021.

1. Don’t forget that your minimum wage will rise by $1.10 to increase it up from $18.90 to $20 an hour starting on April 1 2021. This could impact your financial records as well as superannuation payments.
2. A new 39% personal tax rate is set to apply to incomes of more than $180,000. The new rate will apply beginning on April 1, 2021. Tachibana believes it is more likely to affect those who earn income from 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 of injuries suffered by employees will be kept at current levels until 2022 to help businesses deal the financial burdens of COVID-19. At the time of January 2021 the levy stood at $1.39 for every $100 (1.39 percent).

The essential elements to EOFY the success of EOFY

Here are some helpful tips and dates from experts that small business owners might wish to consider to ensure their house is organized for tax season.

1. Finalise your accounts

• Check and approve your bills, invoices and expense claims.
• Monitor accounts that are due and outstanding transactions for an overview of the entire year.
• Review debtors as at 31 March and consider taking any bad debts off in order to make them an expense at the end of the year.
• List suppliers or clients who’ve invoiced you on 31 March or earlier, but who won’t be invoiced until April. Take these costs into consideration as expenses for 2020-21.

2. Clean up and reconcile your records

• Incorporate bank statement statements and year-end income tax documents, as well as sales, purchase and expense records.
• Reconcile your bank accounts , and check they match the balances on your bank statements.
• Create a profit and loss account to work out how much annual revenue your business has earned.

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

• Assess information taken during EOFY to determine the financial position of your business.
• Ask your payroll vendor to provide EOFY data when you can, so that it can be analyzed.
• Access Inland Revenue information, including PAYE tax responsibilities and any KiwiSaver obligations for employees.

4. Superannuation is a key component of the financial system.

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the rate dependent on their earnings and length of tenure.
• Filing electronically, as required, if your business pays at least $50,000 in PAYE tax and ESCT.

*For KiwiSaver, businesses need to pay ESCT for compulsory employers’ contributions of 3 percent, but not on contributions that are deducted from the wages of 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 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 after 31 March in order to claim a deduction for employee-related expenses such as bonuses, holiday pay, and long-service leave.
• If your income is substantially higher than last year, think about making an additional tax provisional payment to align your tax payments with your earnings.

6. Separate personal and business finances separated

Tax deductions are not usually available for personal expenses. deductions for personal expenses. only company expenses. But you might add unnecessary compliance charges in the event that your accountant needs to divide what is tax-deductible and the rest of it.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 Tax on income for 2020 to be paid for those who don’t have a tax agent.
• 1 March 2021 GST return due and payment due by the end of January for businesses filing every two months.
• 21 March Tax year 2020 return due for clients of tax professionals (with an effective extension of the deadline).
• 1 April 2021 - the new financial year begins in New Zealand.
• 7 May 2021 - final provisional tax instalment due for the fiscal year 2020 and the last opportunity to make voluntary provisional tax payments.
• 7 May 2021 - end-of-year GST return and due payment.

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