The end of the financial year is fast approaching and businesses are clearing out as much stock as they can through EOFY sales. What does your business need to do before the end of the fiscal year? Are your tax affairs in order? The checklist below will help you make the right start to planning for EOFY.
- -Go hard and chase down outstanding payments from customers. If you have exhausted all avenues and you’re not going to be able to recover the debts, write them off before the end of the fiscal year – a tax deduction is only available when the debt is written off as a bad debt.
- -Think about writing off the value of any obsolete stock so that you can claim a tax deduction. Consider using simplified stock rules for small businesses and avoid doing a stocktake.
- -Are there any pending expenses that you know you will need to pay post fiscal year-end? Ask suppliers for all invoices for supplies made up to 30 June – arrange to pay them and get a tax deduction.
- -Prepay expenses for services, consumables or supplies before EOFY – you can claim a tax deduction for prepaid expenses if the payment covers a period of 12 months or less and that period ends in the next year.
- -Review plans to purchase fixed assets and consider purchasing them before fiscal year-end – you can claim an outright tax deduction for assets up to a value of $6500.
- -Accurately calculate employee bonuses and notify employees of their bonus for the year – where your business has a definite commitment or legal obligation to pay the bonus, you can get a deduction for it.
- -Check and pay all superannuation obligations. You get a deduction for all employee obligations paid.
- -Review loans made to company directors – where loans are outstanding they could be treated as dividends and subject to tax for the director.
- -If your business structure contains a trust, start planning for any trust distribution that needs to be made by fiscal year-end. Consider the impact of any capital gains that arose during the year.
- -Defer business or asset sales close to post-EOFY – if these can be deferred, you may be able to defer the taxing point of that income to next financial year. If you made a capital gain, you may be eligible for capital gains tax concessions.
- -Vary your income tax instalment rate down and pay less tax. If you have paid more tax in the first three quarters of the year compared to your estimated full-year income tax liability, you can vary your rate down and claim back a refund for the tax overpaid. Take care, as there are penalties where your variation is inaccurate.
- -Get your documents together so you can fulfil your reporting obligations with the ATO, including Annual GST Return, PAYG withholding for amounts paid to businesses and PAYG Summary Statement for wages, salaries and other work-related payments.
So get to it and get your business in order before the end of the financial year. Once you have ticked off the items in the checklist, we can raise our glasses to fewer taxes in 2013 and a happy new financial year!
* This article contains general information and commentary only, and is not financial, financial product or legal advice, and you agree not to rely upon this article in any way.