We help you prepare for the end of the financial year and potentially reduce your tax bill.
The 30 June deadline is approaching fast, but it’s not too late to get yourself organised, potentially reduce your business's taxation burden and ensure you've met your compliance obligations.
EOFY tips include prepaying expenses (to reduce your current year income, to take advantage of prepayment discounts or to avoid imminent price rises) and buying deductible items sooner rather than later (so you don't have to wait another year to receive the benefit of the tax deduction).
Another reason for buying this time of year is that vendors and retailers often run EOFY sales. Just don't be tempted into buying something you don't really need, or that isn't suitable.
The $20,000 immediate asset write-off is a potential boon for small businesses, but as always keep an eye on your cashflow when making purchasing decisions. There's not much point saving a few dollars if that results in you being unable to pay your income tax or GST bills.
Some additional tips we received from James Solomons, head of accounting at Xero Australia, include:
- Get your records organised. Whether you use an accountant or bookkeeper, or you do your own books and returns, you'll need to get your records in shape. Keeping documents in electronic form – especially in the cloud – can help.
- Plan for a stocktake. This doesn't apply to all businesses, but if your business buys or sells stock you’ll have to conduct a stocktake unless your turnover is less than $2 million and the change in value is less than $5,000. A stocktake tends to be time consuming, so warn your customers if it's going to affect your trading hours.
- Set goals for the coming year, and review your existing plans to ensure they are still appropriate.
Julie Rynski, general manager SME at Westpac, provided some further ideas:
- Write off bad debts. That includes preparing minutes documenting the debts and all efforts you have made to recover them, otherwise they cannot be claimed as deductions. Remember to adjust for any GST charged on the invoice.
- Comply with your superannuation requirements. Super is not tax deductible until it has been paid, so it is important to ensure all super contributions for employees are completed by the end of the financial year.
- Check your trust obligations. There is a requirement for the trustee to sign off on the distribution of income to beneficiaries before 30 June. If a valid distribution does not occur before this time, there is a risk that the accumulated income will be taxed to the trustee at a penalty rate.
- Consider any capital gains tax benefits. If your business has made a capital gain in the current financial year, the best approach is to assess the presence of any other capital losses that may offset those gains. For example, you could include selling assets that have incurred a capital loss.
What EOYF advice have you been given that you'd commend to your fellow small business owners? Please tell us in the comments.