End of financial year is a time many businesses dread because it means additional time spent ensuring their accounts are up to date and in order. Whilst time is critical and you want to be spending as much of it as possible building the business or with your family it is important that you prepare for the June 30 deadline.
Do make time with your advisor or accountant to discuss how to make the most of your tax position to help you get ahead. They can help you estimate your likely tax position and provide strategies that work for your business, and give you time to implement them.
Note: the recent Federal budget announcement may affect small business, so be sure ask about its impact on future financial years.
Here are 8 quick tips to help ease the 30 June burden.
(Please note that these tips apply to small businesses with less than $2 million annual turnover).
- Be certain to get your super deductions. Even though superannuation doesn’t have to be paid until 28 July, paying employee and personal contributions by 30 June will allow time for processing delays and getting valuable deductions this year.
Note: Superannuation is only deductible when paid therefore it must be cleared through your bank account, received and recorded by the employee’s superannuation fund prior to that date. Be prepared; pay early. - Pay expenses in advance. If your cash flow allows, consider paying recurring expenses in advance, Items such as insurances, interest, rent, conference fees, subscriptions, and travel costs. Using credit cards to pay for deductible expenses will earn you the deduction this year, even if you don’t pay for it until next year.
- Defer income: If you expect your company tax bill will be higher this year than next year, you may benefit from deferring income to next year and accelerating deductions into this year.
Home Office Expenses. If you operate your business from home, remember to claim deductions for rent, insurance and utilities. - Spend and only if you need to. Consider replacing low-cost equipment or purchase new tools and computers soon before 30 June to get the full tax benefit now.
- Write off bad debts. To deduct bad debts, the ATO requires you to write it off while it still exists, prior to 30 June. Review your accounts receivable with your accountant or bookkeeper to determine whether a deduction qualifies before the deadline.
- Check your assets and inventory. Consider writing down or writing off obsolete stock. Then think about revaluing the remaining stock using one of three methods: cost price, market selling value or replacement value. Choose the method that produces the lowest stock value; if the value of closing stock is less than the value of your opening stock, you may receive a deduction. When the reverse occurs, you may generate income.
- Repay any borrowings. If you, a family member or an associate have borrowed money from your business, you should ensure that the company charges the appropriate interest and consider making the minimum required repayments before the end of the financial year.
Note: Failure to do so may result in the entire amount of the loan being treated as taxable income, causing you to be taxed personally at rates of up to 46.5 per cent.
Use expertise not guesswork.