Important dates and tips to help small businesses get ready for EOFY

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

For small businesses such as retailers or restaurants, it’s especially important to monitor stock levels when the closing date of the financial year approaches.

If you go to your accountant and can’t remember your stock levels from a couple of months ago this can lead to problems.

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

That’s a change that will have a significant impact on small-scale companies.

3 significant changes for 2021

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

1. Do not forget that the minimum wage is set to increase by $1.10 and will increase between $18.90 to $20 per hour on April 1, 2021. This could impact your financial records and 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 April 1, 2021. Tachibana states that this is more likely to affect those who earn a living from providing personal services, instead of those who own the shares and make capital gains.
3. It is important to be aware of the ACC Earners’ levy, that covers the cost related to injuries sustained by employees, will be kept at present levels until 2022 to help businesses deal the financial burdens of COVID-19. In January 2021, the levy sits at $1.39 100 cents (1.39%).

The fundamental elements of EOFY successful EOFY

Here are some important information and dates from experts who small business owners might want to keep in mind as they get their home in order for tax time.

1. Finalise your accounts

• Check and approve your bills, invoices and expense claims.
• Monitor accounts that are due and outstanding transactions for a view of the year in its entirety.
• Re-evaluate debtors on 31 March, and think about eliminating any outstanding debts to be considered an end-of-year deduction.
• List suppliers or clients who’ve invoiced you on 31 March or earlier, but who won’t be reimbursed till after April. Think about treating these expenses as 2020-21 costs.

2. Clean up and reconcile your files

• Bank statements should be consolidated, year-end income tax documents, as well as sales, expense and purchase records.
• Check your bank accounts to ensure they are reconciled and check they match the balances from your bank statement.
• Create a profit and loss account to determine how much profits your company made annually.

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

• Assess information that you have collected during EOFY to assess the financial situation of your business.
• Request your payroll provider to send EOFY details when you can, so that it can be reviewed.
• Access Inland Revenue records, which include PAYE tax responsibilities and any KiwiSaver obligation for workers.

4. Superannuation management

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the tax rate varying for each employee based on their earnings and length of tenure.
• Filing electronically, as required when your business is paying $50,000 or more a year in PAYE tax and ESCT.

*For KiwiSaver businesses, they have to pay ESCT on employee contributions up to 3%, but not on contributions taken from the employee’s wages.

5. Maximise your tax refunds

• Record all expenses and purchases of assets during the year, plus the cost of improvements or maintenance to claim any refunds from EOFY.
• Take into consideration disposing of stocks that are no longer in use, as provisions for obsolete stock or write-downs on stock aren’t generally allowed as tax deductions.
• Consider making payments within 63 days of 31 March to get an employee-related expense deduction such as holiday pay, bonuses and long-service leave.
• If your income is significantly more than it was last year, you may want to consider an additional voluntary provisional tax payment to make sure your tax payments are aligned to your income.

6. Maintain personal and financial finances Separately

There aren’t any tax deductions on personal expenses. If it’s only your business expenses, you could be adding unnecessary compliance costs if your accountant has to split up what’s tax deductible and the rest of it.

Important tax dates in 2021

• 9 February 2021 Income tax for 2020 due for taxpayers who don’t have a tax professional.
• 1 March 2021 - GST return and tax due at the end of January for businesses filing every two months.
• The deadline for filing is 31 March 2021 – 2020 tax return due for tax agents (with an effective extension of the deadline).
• 1 April 2021 The new financial year begins in New Zealand.
• 7 May 2021 Final installment of the tax proviso for the 2020 financial year and last chance to make voluntary tax payments.
• 7 May 2021 End-of-year GST return and due payment.

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