Important dates and advice to help small businesses get ready for end of financial year

Using intuitive accounting software and cloud storage options like Google Drive or Dropbox – in addition to tenancy administration software like myRent.co.nz - could save businesses time.

Smaller businesses, such as restaurants or retail stores It’s particularly important to keep track of stock levels as the closing date of the financial year looms.

If you visit your accountant and can’t remember your stock level from the last few months this can lead to problems.

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

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

Three important changes to 2021

These are just a few of the important tax-related reforms that took place recently or are scheduled for 2021.

1. Don’t forget that your minimum wage is set to increase by $1.10 to increase it between $18.90 to $20 an hour on April 1, 2021. This could affect 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 tax rate will be in effect from 1 April 2021. Tachibana believes it is more likely to be a problem for those who earn income from providing personal services, in contrast to those who hold investment accounts and are able to earn capital gains.
3. Be aware that the ACC Earners’ levy, which helps cover the costs that are incurred by injuries to employees, will remain at its current levels until 2022 to help businesses deal with the financial pressures of COVID-19. As of January 20, 2021 the levy is $1.39 per $100 (1.39 percent).

The essential elements to EOFY successful EOFY

Here are some important advice and dates from experts that small-business owners may need to be aware of when getting their house up and running for tax time.

1. Finalise your accounts

• Make sure you approve the invoices, bills and expense claims.
• Review accounts with a late payment and outstanding transactions for an overview of the entire year.
• Examine debtors at the time of 31 March. You may also consider taking any bad debts off in order to make them a year-end deduction.
• Include clients or suppliers that have invoiced you on 31 March or before but aren’t paid until after April. Take these costs into consideration as 2020-21 costs.

2. Make sure you reconcile and clean up your records

• Bank statements should be consolidated, income tax year-end documents, as well as sales, expense and purchase records.
• Reconcile your bank accounts , and make sure they are in balance with the amounts from your bank statements.
• Prepare your profit and loss statement to determine the amount of annual profit your business made.

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

• Review the information you have obtained during EOFY to determine the financial health of your business.
• Contact your payroll provider to supply EOFY information as early as possible so that it can be analyzed.
• Access to Inland Revenue records, which include PAYE tax obligations and KiwiSaver duties for staff.

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

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the rate differing for each employee based on their earnings and length of their tenure.
• Electronically file, as required when your business is paying at least $50,000 in ESCT tax and PAYE tax.

*For KiwiSaver businesses, they have to pay ESCT for compulsory employee contributions up to 3% but not on contributions deducted from wage payments to employees.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, plus spending on repairs or maintenance to claim any refunds from EOFY.
• Take into consideration disposing of stocks that are no longer in use since provisions for obsolete stock or stock write-downs aren’t generally allowed as tax deductions.
• You should consider making your payments within 63 days after 31 March, to receive an employee-related expense deduction like bonuses, holiday pay, or long-service leaves.
• If your income is higher than last year, you may want to consider 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 business expenses. You could be incurring unnecessary compliance costs in the event that your accountant needs to separate what’s tax-deductible and the rest of it.

Important tax dates in 2021

• 9 Feb 2021 Tax on income for 2020 due for those who don’t have a tax professional.
• 1 March 2021 GST return and due at the end of January for businesses that file each two months.
• 21 March - 2020 income tax return due for clients of tax agents (with an effective extension of the deadline).
• 1 April 2021 the start of the new financial year starts in New Zealand.
• 7 May 2021 Final installment of tax provisional due for the 2020 financial year and last chance to make tax provisional voluntary payments.
• 7 May 2021 GST tax return at the end of the year and due payment.

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