What Small Businesses Need to Do at the EOFY
Yay, it’s tax time – said no one ever! The end of the financial year (EOFY) can leave you with a big fat tax refund in your pocket or running around like a headless chicken, or perhaps, a combination of the two. What you need is a year-end checklist for small business owners – and that’s where we come in.
We know it’s all too easy to put it off, but with 30th June fast approaching, you should be well into the process. If you’re all over the place, it’s time to get things in order – fast.
Here’s our end of financial year checklist for small business owners to help you keep more of your hard-earned cash in your pockets before the closing date arrives.
1. Pay Tax Debts on Time or Else
Yes, that’s a threat coming straight from the Australian Tax Office (ATO). Tax debts of more than $10,000 that are outstanding for more than 90 days without a payment arrangement to credit reporting bureaus will be reported by the ATO to the credit bureaus. This is bad news. It will not only negatively impact your business’s credit report (your gateway to financing) for up to five years, but it will also impact your supplier arrangements and current financing situation.
Don’t just look the other way, double-check your ATO statement so that you know exactly where you stand, what you owe, and if you need to factor in additional costs to your June cash flow budget.
2. Review Your Superannuation
This can be a huge worry for business owners right about now and is why it’s number two on our year-end checklist for small business entities. If superannuation is paid late, it’s not tax deductible. Businesses can easily miss out on valuable tax deductions if contractors are overlooked or if there are wage corrections not made on time. Admin fees and interest charges should, therefore, be applied in order to bring everything up-to-date.
Solution: Stop tearing your hair out and review your contractor payments and wages now so you can make sure that everything’s paid up.
3. Review Your Assets & Inventory
Does your business hold stock and assets? Most likely your answer is “yes”. Typically you’ll need to conduct a stocktake, unless your SME and your trading stock have not changed in value by more than $5,000 in the last financial year (hopefully that’s not the case!).
If you haven’t done so already, now’s the time to undertake a stocktake and review your assets. You don’t want to get into the EOFY with money tied up in useless assets and unused inventory.
Check to see if there’s anything that can be written off (perhaps stock or old IT equipment that’s just sitting around collecting dust or damaged, for example).
Bottom line: If you have an asset that you bought or installed for use within the past year, your business may be entitled to up to $30,000 in the form of an instant asset write-off! The main qualification for this instant write-off is that the asset is valued at less than $30,000.
4. Sort Out Your Expenses
Consider carrying out some last minute maintenance to your business expenses. You should consider whether or not, for example, it’s worth buying something or hiring someone new just before June 30th falls. Doing so would allow you to benefit from tax deductions that you’d otherwise have to wait another year to see.
Is it worth buying before June 30th?
This is something that you should think about carefully. Consider if you were going to buy it anyway – if that’s the case, then go for it! After all, for an SME business, a dollar spent will save you 28.5 cents in tax. Just be sure not to rush into spending your dollar just for the sake of the tax deduction – carefully consider whether or not it’s something you really need.
If your cash flow currently can’t support the purchasing of an asset or hiring of a new employee, consider using Become to find suitable business loans for you to fund the purchase.
5. Check Services Available to You
Small businesses may also be eligible for a wide range of tax benefits including:
- Simpler depreciation for businesses of a certain size (be sure to follow the rules of the ATO)
- Capital gains tax (CGT) concessions
Be sure to check your eligibility with a reputable tax agent.
Up until June 30th, a good hunt online could also lead to you finding advertising deals as well as all sorts of discounts, such as recruitment firms offering service discounts, options to pre-purchase in advance, and secure savings.
Now’s also a great time to review your workforce needs and plan ahead for the future. If your marketing department could do with a boost, or you need a business consultant to help plan the next 12 months, five, or even ten years of your company to keep it moving forward, EOFY is a great time to invest.
6. Review Your Debtors
It’s now or never. Be sure to complete a once over (or twice over) of your debtors listing and write off any debts to claim all possible tax deductions this year. Be sure to exhaust all approaches to getting paid on time – don’t give up on your hard-earned cash!
For the financial year ahead, you should consider outsourcing invoice factoring – a means to cover outstanding invoices and avoid this situation in the tax year to come.
7. Maximise Deductions
There’s a very, very long list of potential areas where you could (and should) be claiming tax deductions. Be sure to double-check a year-end accounting checklist with your accountant or tax agent before the time’s up.
Deductions include (but are not limited to) the following small business tax checklist:
- Car & trucks
- Clothes, footwear & goggles (so long as it’s compulsory, protective or occupation-specific) plus laundering
- Salaries & wages
- Contract labour
- Business property
- Equipment rental
- Interest on business indebtedness
- First aid courses
- Self-educational costs (Conferences, training courses, seminars etc.)
- Tax agent fees
- Subscriptions to industry publications
- And anything else we’ve missed…
The deadline is fast approaching, but saving on tax is still possible! Right now is when you should get serious and make good use of these opportunities before they disappear like sand slipping through your fingers.
Don’t forget, if you need any help for the new financial year, Become is here to match you up with ideal lenders that are suited specifically to your needs. And don’t be afraid to get in touch or let us know of anything we may have missed in our ‘year end accounting checklist’ for SMEs.
Disclaimer: This small business tax checklist is of a general nature. Business owners should be sure to have a chat with their tax accountant to ensure the best actions are taken from a tax perspective to suit the specific needs of the company as it heads into the new financial year.