Important dates and tips to help small businesses prepare for end of financial year

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

For smaller businesses like retailers or restaurants It’s particularly important to monitor the stock levels in advance of the time for the end of the fiscal year draws near.

If you go to your accountant but aren’t able to recall the stock levels you had just a few months ago this can lead to problems.

A great reminder for small business owners is that a temporary increase of the immediate asset write-off period during COVID-19 – from $500 up to $5,000 – will be increased back to $1,000 beginning 17 March 2021.

This change will be a major impact on small-scale businesses.

Three important changes to 2021

Here are some other important tax-related reforms that have recently occurred or are on the agenda for 2021.

1. Don’t forget that the minimum wage will rise by $1.10, taking it up from $18.90 to $20 an hour from April 1 2021. This could potentially affect your financial records as well as superannuation payment.
2. A new 39% personal tax rate will be imposed on income above $180,000. The new rate will take effect from 1 April 2021. Tachibana states that it is more likely to affect those who earn income by providing personal services in contrast to those who hold the shares and make capital gains.
3. Make sure you are aware that ACC Earners’ levy, which helps cover the costs associated with employee injuries, will remain at the current levels until 2022 to help businesses deal the financial burdens of COVID-19. As of January 20, 2021 the levy sits at $1.39 100 cents (1.39%).

The fundamental elements of EOFY success

Here are some key information and dates from experts who small business owners might need to be aware of when getting their house up and running for tax time.

1. Finalise your accounts

• Review and approve your invoices, bills and expense claims.
• Monitor accounts that are due and outstanding transactions for a view of the year’s total.
• Review the debtors’ accounts as of 31 March and consider writing off any bad debts to be considered a year-end deduction.
• List suppliers or clients who’ve invoiced you on 31 March or before but aren’t paid until after April. Take these costs into consideration as 2020-21 expenses.

2. Clean up and reconcile your records

• Combine bank accounts, income tax year-end records, plus sales, expense and purchase records.
• Consolidate 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 determine how much annual revenue your business has earned.

3. Review data from your payroll vendor as well as Inland Revenue

• Examine the data obtained during EOFY to evaluate the current financial situation of your business.
• Ask your payroll vendor to provide EOFY data as soon as you can so that it can be analyzed.
• Access to Inland Revenue records, which include PAYE tax obligations, as well as KiwiSaver obligations for employees.

4. Superannuation management

• Check your employer’s superannuation contributions tax (ESCT) rates*, with the rate different for each employee depending on their salary and the length of service.
• You must file electronically, in accordance with the mandate when your business is paying $50k or more in tax on PAYE and ESCT.

*For KiwiSaver, businesses need to pay ESCT on employer contributions of 3%, but not on contributions taken out of employee wages.

5. Maximise your tax refunds

• Track expenses and asset purchases throughout the year, as well as the cost of improvements or maintenance for claiming any EOFY refunds.
• Think about disposing of stock that is no longer needed since provisions for obsolete stock or write-downs of stock are not typically allowed as tax deductions.
• It is recommended to pay within 63 days after 31 March, to receive an allowance for employee-related expenses like bonus pay, holiday pay and long-service leaves.
• If your income is substantially greater than the previous year, you may want to consider an additional voluntary tax payment to make sure your tax payments are aligned with your turnover.

6. Keep business and personal finances Separately

It is not common to get tax deductions for personal expenses. it’s just business expenses, you could be adding unnecessary compliance costs in the event that your accountant needs to separate what’s tax-deductible and the rest of it.

Tax dates for 2021 are important.

• 9 Feb 2021 Income tax for 2020 due for those who don’t have a tax professional.
• 1 March 2021 GST return due and payment due for the end of January for companies that file every two months.
• The deadline for filing is 31 March 2020 income tax return due for clients of tax professionals (with a valid extension of the deadline).
• 1. April, 2021 The new fiscal year begins on the island of New Zealand.
• 7 May 2021 Final proviso tax instalment due for 2020’s fiscal year and the final opportunity to make voluntary tax payments.
• 7 May 2021 Tax return for the year’s end and payment due.

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