If it’s your first year in business – Here’s what you need to know about EOFY.
EOFY for first-time business owners means the first time you will need to submit your financial information to the IRD. This means giving all your financial information to your accountant (if you have one) or collating it yourself to file on your tax return for submission. .
Due to complex tax laws, we recommend that you consult with a qualified advisor. Because no one expects first-time business owners to understand all the relevant laws to get everything right the first time. Accountants can save you from making costly mistakes and providing incorrect information to the IRD. They can also make sure you claim all the appropriate expenses for your business.
The NZ income tax year starts on 1st April and runs until 31st March. If you are registered with a tax agent (accountant) you can usually get an extension of time which allows for your tax return to be filed by March 31st of the following year. Eg for the EOFY that ended on 31 March 2020, your return must be filed by 31 March 2021. If you are not registered with a tax agent, your returns must be filed by 7 June . E.g. EOFY 31 March 2020 your return must be filed by 7 July 2020.
Online accounting and payroll software
Using cloud-based accounting software does a lot of the work for you, saves you a lot of stress, and makes it easier for your accountant to access your information. It provides a place to save all your invoices, receipts, payroll records and asset registers. Calculating your GST also helps if you are registered also gives you a clear picture of your cash flow, profit and loss and balance sheet. Check out my other articles to see a comparison of accounting software (Xero, MYOB, quickbooks, invoiceninja) and other useful apps like Hubdoc.
Make sure you have backups of your files as hardware can get damaged especially if you are using a desktop based system.
Find out how much tax you owe
By using an accounting system, it not only gives you a real time view of your business, it also means at the end of the financial year you will be able to sort out your business and personal income tax. It will also help to determine whether you should pay provisional tax next year.
An accountant can easily do this for you however if you want to DIY your IRD return a range of calculators to simplify this process.
You can claim back any business purchases you made throughout the year. This may include expenses such as rent, electricity, and internet for any home office space you use to work, travel for business purposes, office equipment, motor vehicle expenses and or any things you personally paid for to run your business.
Remember not to set off any personal expenses against your business. See the article on business expenses to make sure you’re claiming all the business expenses you can.
The End of the Financial Year is also a good time to make sure all your accounts are up to date and ready to send to your accountant. The faster you have the information the faster you should get your results back. Once you have your file ready for your accountant, you can take a minute, relax and then prepare for the new financial year ahead.