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

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

For smaller businesses like restaurants or retailers It’s crucial to monitor the stock levels in advance of the end of financial year draws near.

If you go to your accountant, and you are unable to recall the levels of your stocks from just a few 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 to $5,000 – will be increased back to $1,000 as of 17 March 2021.

It’s a change that could be a major impact on small-scale businesses.

3 important changes in 2021

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

1. Remember that the minimum wage will increase by $1.10 increasing it up from $18.90 to $20 an hour starting on April 1 2021. It could affect your financial records and superannuation payouts.
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 states that this will more likely affect those who earn income by providing personal services as opposed to those who have the shares and make capital gains.
3. Take note that ACC Earners’ levy, which helps cover the costs related to injuries sustained by employees, will remain at its 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%).

The essential elements to EOFY successful EOFY

Here are some important information and dates from experts which small-business owners might need to be aware of to ensure their house is in order 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.
• Re-evaluate debtors on 31 March. Consider the possibility of writing off any bad debts so that they can be counted as a year-end deduction.
• You should list clients or suppliers who have invoiced you by 31 March or earlier but aren’t reimbursed till after April. Think about treating these expenses as expenses for 2020-21.

2. Clean up and reconcile your files

• Incorporate bank statement statements and year-end income tax documents, as well as sales, expense, and purchase records.
• Reconcile your bank accounts , and check they match the balances from your bank statement.
• Create a profit and loss account to calculate the annual profit your business made.

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

• Review the information you have taken during EOFY to evaluate the financial position of your business.
• Contact your payroll provider to supply EOFY information when you can, so it can be analysed.
• Access to Inland Revenue records, including PAYE tax obligations as well as any KiwiSaver obligations for employees.

4. Manage superannuation

• Update your employer superannuation contribution tax (ESCT) rates*, with the rate varying for each employee based on their salary and length of tenure.
• File electronically, as mandated, if your business pays at least $50,000 in PAYE tax and ESCT.

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

5. Maximise your tax refunds

• Track expenses and asset purchases in the course of the year, and the cost of improvements or maintenance for claiming any refunds from EOFY.
• You should consider disposing of old stock, as provisions for obsolete stock or write-downs of stock are not usually tax-deductible.
• You should consider making your payments within 63-days after 31 March in order to claim an allowance for employee-related expenses like holiday pay, bonuses and long-service leaves.
• If your income is substantially greater than the previous year, you may want to consider an additional tax provisional payment to make sure your tax payments are aligned with turnover.

6. Separate personal and business finances separated

It is not common to get tax deductions for personal expenses. it’s only your business expenses. You could be incurring unnecessary compliance costs If your accountant must separate what’s tax-deductible and the rest of it.

Certain tax deadlines for 2021 are crucial.

• 9 February 2021 - 2020 income tax due for those who do not have a tax agent.
• 1 March 2021 - GST return and tax due for the end of January for those who file their GST returns every two months.
• 31 March 2021 Tax year 2020 return due for tax professionals (with a valid extension of time).
• 1 April 2021 - the new financial year begins from New Zealand.
• 7 May 2021 - final provisional tax instalment due for 2020’s fiscal year and the final opportunity to make provisional tax payments.
• 7 May 2021 Tax return for the year’s end and payment due.

Note: Some dates may differ from the deadline, such as if a due date falls on a weekend or public holiday.