16 Jun Preparing your business for the EOFY
Preparing your business for the EOFY (end of the financial year) is a great way to ensure you are meeting your obligations as a small business owner and you can take advantage of all the offers that may be available to you if you have planned. The end of the financial year can be an exhausting and stressful time for small businesses and individuals. Throw in the complications of COVID-19, and preparing for the EOFY has become an increasingly complicated process for all.
This EOFY checklist will help you meet your legal obligations and assist you to get the right tax outcomes for your business.
Top tips to get you ready
- Make sure your records are up-to-date
- Tie up loose ends
- Bring forward expenses/spending
- Simply accounting by using online tools
- Understand your deductions
- Check out COVID relief opportunities
- Write off bad debts
- Meet your superannuation requirements
- Be aware of due dates
- Review all your monthly subscriptions
1. Make sure all of your records are up-to-date
Having important paperwork in place helps to streamline the EOFY process.
Some examples of records you need to keep are:
- receipts for sales and purchases
- records concerning tax returns, activity statements and employee super contributions
- GST returns and Business Activity Statements (BAS).
2. Tie up loose ends
Tying up loose ends can make the financial year-end much smoother. Make sure you’ve invoiced all customers correctly, and you’ve paid any due bills. Bank any cash and cheques, and check all payments have been recognised.
3. Bring forward expenses/spending
If you have expenses due in July or August, an excellent strategy to lower this year’s taxes is to bring forward payment to this financial year. By pre-paying costs before 30 June 2021, you will reduce your taxable income.
Likewise, if your business needs new equipment or vehicles, purchase them before 30 June 2021 so you can claim deductions this financial year.
4. Simplify accounting with online tools
Both EOFY and BAS time will be simpler if you separate your personal banking from your business banking. This helps you capture all your business expenses in one place, while avoiding the risk of accidentally claiming for a purchase that’s not connected with your business. Having a separate business bank account also helps you manage your business cash flow.
5. Understand your deductions
Ensuring you get the right deductions for your expenses makes good business sense, so it’s important to find out what you can claim. You may wish to take advantage of the Federal Government’s popular instant asset write-off scheme for small businesses.
You can also claim deductions if you prepay certain expenses for 12 months or less, such as professional subscriptions, electricity, rent, wages, insurance and utilities. For more information on the types of prepaid expenses that are eligible, visit the ATO’s website and search for ‘Deductions for prepaid expenses’.
If you’re an eligible agribusiness owner you can take advantage of Farm Management Deposits, which can help you manage your tax position in years of good production as you only pay tax when you draw on those funds deposited.
6. Check out any COVID-19 relief opportunities
The COVID-19 situation is fluid and government initiatives such as JobKeeper Payment may impact your EOFY tax situation. For the latest information, refer to the ATO’s COVID-19 support for businesses web page.
You may also wish to seek professional advice regarding the tax and superannuation implications of COVID-19 business relief.
7. Write off bad debts
If you pay GST on an accruals basis, you can claim back the tax you’ve already paid on what’s turned out to be a bad debt. To receive a refund of the GST previously paid, make sure you include the bad debt in your June quarter BAS or annual GST return.
However, before writing off a debt, consider offering the client a small discount if they pay before 30 June.
8. Meet your superannuation requirements
Businesses with superannuation guarantee (SG) obligations are required to pay employee contributions of 9.5%. Meeting your obligations early, by 30 June 2021, will allow you to claim a tax deduction in your 2020–21 income tax return rather than having to wait until the following year.
Note that employee super contributions aren’t tax deductible until they have been paid, so ensure all contributions are completed by the end of the financial year.
9. Be aware of due dates
Diarise important dates when you must act and submit documents. Put all the required dates in your calendar to give yourself a reminder that will help you avoid ATO penalties.
10. Review all your monthly subscriptions
Cancel or lower any that you have not utilised this financial year. Cancelling any unused subscriptions saves unnecessary costs and reduces workload. Think about starting a Beyond Business Group before the end of the financial year! A worthwhile spend on working on your business.
So get a head start on preparing your business for the EOFY by going through this list of top 10 tips.
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