End of Financial Year – Top 10 Tips for Business’
- Pay and clean up any super owing before 30 June
Businesses must ensure they are paying employees additional superannuation. As superannuation is not tax deductible until it has been paid, it is also important to ensure all superannuation payments owing are completed before 1 July, this is a great way of reducing your income tax bill. Business owners should be aware of the cash flow implications of the change and make plans accordingly.
- Be aware of relevant tax changes
It is critical you are aware of any relevant tax changes which typically come into effect at the start of a new financial year. Start by consulting your financial adviser or running a thorough search of the ATO for news and announcements. This will ensure you are well positioned to either capitalise on a positive change or prepared for an adverse change. Forewarned is forearmed.
- Get your tax-deductible expenses in order
An easy way for SMEs to claim tax deductions is to pre-pay relevant services and supplies such as office supplies or costs for supplier services, such as accountant fees, up to a period of 12 months or less. By bringing forward tax-deductible expenses and deferring income, you can reduce your taxable income for the financial year. Approach your suppliers now for all invoices made up to 30 June and organise payments arrangements to secure a great number of tax deductions.
- Be aware of all applicable tax benefits
Any business with a turnover of less than $2M is eligible for a wide range of tax benefits within areas such as Capital Gains Tax, Income Tax, Goods and Services Tax, and Fringe Benefits Tax. So make sure you are aware of any tax benefits that may be applicable to your business. This is especially important for small to micro business owners.
- Know the value of your depreciating assets
Another tax opportunity for SMEs with a turnover under $2M are available tax deductions on any depreciating assets up to the value of $6,500, purchased before 31 December 2013. Business assets which may fall into this value category include office equipment, computers, printers, work tools, etc. Make sure you keep track of assets within this value category for potential tax deductions.
- Keep your income producing assets up-to-date
You can reduce operating costs, increase productivity and free up cash by structuring your financing and repayments to suit your tax and cash flow needs. Make an effort to keep your income producing assets up-to-date, as this helps keep your business operationally efficient and maximise cash flow.
- Write off bad debt
According to the latest Dun & Bradstreet Trade Payments Report, the average number of days business-to-business payments being made has increased, now sitting at an average of 56 days. If you’re still chasing invoices from the last financial year, now the time to write them off. Bad debts are tax deductible and can be used to offset your taxable income.
- Reassess your cash position
Starting the year with a healthy cash position is crucial. Ensure you review your cash management processes and consider the most appropriate funding solutions. There are a number of cash flow finance tools to help you better manage cash flow and funding. Invoice finance is gaining in popularity as it provides advances of up to 95% against receivables without needing real estate security, and is scalable in line with the sales growth of the company.
- Have an accounting spring clean
As a number of tax and superannuation changes take place from 1 July onwards, make sure you review and update your accounting systems to include these changes; as you do not want to have to back pay items such as missed super contributions or lose other potential tax saving opportunities next end of year financial year.
- Reward your staff
End of the financial year is always a good time to reward your hard-working staff and thank them for their contribution to your business. Take them out to lunch or consider rewarding them with a small bonus. It may also be a good time of year to review their KPIs and present your refreshed business and marketing strategy.
Tips for Individuals
Know what you’re claiming:
So, you’re hoping to get a nice big cheque after lodging your tax return, but you’ve got no idea what you can and can’t claim?
- Sort through your receipts: Go through your receipts from the past financial year and set aside what you can claim on, eliminating the ones you can’t. If your receipt stockpile is lacking a little organisation, then turn over a new leaf next financial year and start filing them away as you go or file them digitally with the ATO’s myDeductions app, so that next year you’re not scrambling to find them at the last minute.
- Check your diary: If you haven’t kept a consistent log of any work-related expenses throughout the year, then go back and flick through your diary or digital calendar and look for dates where you attended any external meetings, business lunches or travelled for work. This will give you a reminder of any work expenses you might’ve forgotten about.
- Think outside the box: Do your research and find out exactly what you’re entitled to claim. You might discover a bunch of less obvious work-related expenses you never knew you could claim on. Work from home every so often? Well, you might be eligible for a return on any home office equipment purchases, plus, the portion of your internet bill or even your power bill that was used for work. Just be sure to keep a log of this, because you’ll need to be able to prove it if questioned.
Make any big purchases now:
If you’re planning on making any big purchases, right before the end of the financial year is a good time to do it, so you can claim it on your tax return right away. Plus, you could potentially score huge savings on the purchase thanks to all the end of financial year sales!
So, if you’re thinking of upgrading your station wagon to a luxury model, then take advantage of the current EOFY sales now, while they’re still around!
Do an audit on your finances
Since you’re already checking out your finances, why not do a quick review of any potential savings on your other bills and expenses while you’re at it? As a rule of thumb, you should aim to review your finances and financial products at least once a year, so EOFY is the perfect time to get into this habit.
Look for a better deal
Now’s the time to go back and check that you still have a competitive deal on your home loan, credit card or anything other expenses. Paying a fortune in interest on your home loan? See if there’s a better offer out there than what you’ve currently got.
Pay off any debt while you’re at it
Stuck for a new financial year’s resolution? Set yourself a goal to eliminate any lingering debt you have as soon as possible.
If you need any help or advice getting organised for the 20/21 End Of Financial Year, call our office on 02 9369 1604 – we can help!