Want to save yourself a headache come tax-time this year? Of course you do! Planning ahead could save you considerable time, money and angst when the financial year ends on 31 March 2021.

But where should you start? Sumire Tachibana, manager of business advisory at William Buck accountants and advisors, says organising your important documents is a great first step.

"Record-keeping is something that all businesses should be getting right on a day-by-day basis," Tachibana says. "Being organised from the get-go will ensure minimal preparation time is required when it’s time to put together your tax return."

Tachibana adds that using intuitive accounting software and cloud storage such as Google Drive or Dropbox – as well as tenancy management software such as myRent.co.nz – could save businesses time.

Chris Mercer, managing director at MBP Advisors + Accountants, says for small businesses such as retailers or restaurants, it's especially important to track stock levels as the end of financial year looms.

"If you go to your accountant and can’t remember your stock levels from a couple of months ago, that creates difficulties."

Mercer also reminds small business owners that a temporary increase of the instant asset write-off during COVID-19 – from $500 to $5,000 – is being scaled back to $1,000 from 17 March 2021.

"That’s a change that will have a big impact on small businesses," he says.

3 important changes in 2021

Here are some other important tax-related changes 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 from $18.90 to $20 an hour as of 1 April 2021. This could potentially affect your financial records and superannuation payments.
2. A new 39% personal tax rate will apply on income above $180,000. The new rate will apply from 1 April 2021. Tachibana says this is more likely to affect those who earn income from providing personal services, rather than those who hold investments and earn capital gains.
3. Be aware that the ACC Earners’ levy, which funds the costs associated with employee injuries, will be kept at current levels until 2022 to help businesses deal with the financial pressures of COVID-19. As at January 2021, the levy sits at $1.39 per $100 (1.39%).

The building blocks for EOFY success

Here are some important tips and dates from experts that small business owners might want to keep in mind when getting their house in order for tax time.

1. Finalise your accounts

• Check and approve your invoices, bills and expense claims.
• Follow up overdue accounts and outstanding transactions to get a view of the year in its entirety.
• Review debtors as at 31 March and consider writing off any bad debts so they are considered a year-end deduction.
• List suppliers or clients who've invoiced you on 31 March or before, but who won’t be paid until after April. Consider treating these costs as 2020-21 expenses.

2. Clean up and reconcile your records

• Consolidate bank statements, year-end income tax records, plus sales, purchase and expense records.
• Reconcile your bank accounts and check they match the balances from your bank statements.
• Prepare your profit-and-loss statement to work out how much annual profit your business made.

3. Review data from your payroll vendor and Inland Revenue

• Assess information collected during EOFY to review the current financial health of your business.
• Ask your payroll vendor to supply EOFY information as early as possible so it can be analysed.
• Access Inland Revenue records, including PAYE tax responsibilities and 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 $50,000 or more a year in PAYE tax and ESCT.

5. Maximise your tax refunds

• Log expenses and asset purchases during the year, plus expenditure on improvements or upkeep, to claim any EOFY refunds.
• Consider disposing of obsolete stock, as provisions for obsolete stock or stock write-downs are not generally allowed as tax deductions.
• Consider making payments within 63 days after 31 March to obtain a deduction for employee-related expenses such as holiday pay, bonuses and long-service leave.
• If your income is significantly higher than last year, consider making an additional voluntary provisional tax payment to align your tax payments with turnover.

6. Keep business and personal finances separate

Shanan McKeown, director of Munro Benge Chartered Accountants, says from a tax perspective, mixing business and personal finances can get tricky.

• "You generally don’t get tax deductions for personal expenditure; it’s only your business expenses," he says.
• "You could be adding unnecessary compliance costs if your accountant has to split up what’s tax deductible and what’s not."

Some key 2021 tax dates

Note: Some dates may vary from the official deadline, for example if a due date falls on a weekend or public holiday.

Sources:

• https://kiwitax.co.nz/end-financial-year-quick-list
• https://www.simprogroup.com/nz/blog/end-of-financial-year-checklist-2019-2020
• https://www.ird.govt.nz/-/media/project/ir/home/documents/forms-and-guides/ir300---ir399/ir328/ir328-2020-21.pdf
• https://www.business.govt.nz/tax-and-accounting/tax-when-you-have-employees/employer-superannuation-contribution-tax-esct/
• Interviews with:
  • Sumire Tachibana – manager of business advisory at William Buck accountants and advisors
  • Chris Mercer – managing director, MBP Advisors + Accountants
  • Shanan McKeown, Director of Munro Benge Chartered Accountants