Important dates and tips to help small businesses prepare for EOFY

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

Smaller companies, like retailers or restaurants It’s crucial to keep track of stock levels as the close of the financial year looms.

If you go to your accountant but aren’t able to recall the levels of your stocks from just a few months ago and you’re having trouble remembering, it’s a problem.

A useful reminder for small entrepreneurs is that an increase in the write-off of assets in the moment during COVID-19, from $500 to $5,000 – will be increased back to $1,000 starting 17 March 2021.

It’s a change that could affect a lot of small businesses.

3 significant changes for 2021

Here are some additional important tax-related tax changes that took place recently or are planned for 2021.

1. Don’t forget that the minimum wage will increase by $1.10 increasing it to $18.90 to $20 per hour from April 1 2021. This could potentially affect your financial records as well as superannuation benefits.
2. A new 39% personal tax rate will be applied on income above $180,000. The new rate will apply beginning on April 1, 2021. Tachibana believes this is more likely to be a problem for those who earn income from providing personal services, rather than those who hold the shares and make capital gains.
3. It is important to be aware of the ACC Earners’ levy, that covers the cost of injuries suffered by employees will remain at current levels until 2022 to help businesses cope the financial burdens of COVID-19. As at January 2021, the levy stood at $1.39 for every $100 (1.39%).

The building blocks for EOFY the success of EOFY

Here are some information and dates from experts that small business owners might want to keep in mind while putting their home ready for tax time.

1. Finalise your accounts

• Make sure you approve the bills, invoices and expense claims.
• Monitor accounts that are due and outstanding transactions to get a view of the entire year.
• Review debtors as at 31 March. Consider taking any bad debts off 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 who won’t be invoiced until April. You might want to consider treating these costs as 2020-21 expenses.

2. Make sure you reconcile and clean up your records

• Bank statements should be consolidated, year-end income tax and sales records, along with expenses, and purchase records.
• Reconcile your bank accounts and verify that they are in line with the balances from your bank statements.
• Make a profit and loss statement in order to calculate the annual profits your business earned.

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

• Examine the data obtained during EOFY to review the current financial situation of your business.
• Contact your payroll provider to provide EOFY data as early as possible so that it can be analyzed.
• Access Inland Revenue information, including PAYE tax responsibilities and any KiwiSaver obligation for workers.

4. Superannuation management

• Change your employer’s superannuation tax (ESCT) rates*, with rates dependent on their earnings and length of employment.
• Electronically file, as required when your business is paying at least $50,000 in PAYE tax and ESCT.

*For KiwiSaver businesses, they have to pay ESCT on contribution from employers of up to 3 per cent but not on contributions taken out of the wages of employees.

5. Maximise your tax refunds

• Track expenses and asset purchases in the course of the year, and expenses for improvements or maintenance for claiming any refunds from EOFY.
• Consider disposing of obsolete stock because provisions for the disposal of obsolete stock or write-downs of stock are not generally allowed as tax deductions.
• 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 like bonuses, holiday pay, or long-service leaves.
• If your income is higher than last year, you may want to consider an additional voluntary tax payment to make sure your tax payments are aligned with your earnings.

6. Keep business and personal finances separated

There aren’t any tax deductions for personal expenses. it’s only your business expenses. However, you may add unnecessary compliance charges in the event that your accountant needs to split up what’s tax deductible and the rest of it.

Certain tax deadlines for 2021 are crucial.

• 9 Feb 2021 2021 – 2020 tax year due for taxpayers who don’t have a tax agent.
• 1 March 2021 GST return due and payment due at the end of January for businesses filing every two months.
• 31 March 2021 2020 income tax return due for clients of tax agents (with an extension valid for the deadline).
• 1. April, 2021 The new fiscal year begins on the island of New Zealand.
• 7 May 2021 - final provisional tax instalment due for the financial year 2020 and the last opportunity to make voluntary provisional tax payments.
• 7 May 2021 Tax return for the year’s end and due payment.

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