Where has time gone? As a small business owner, the end of the financial year (EOFY) can sneak up on you. But don’t worry! With a little preparation, you can get ahead of the game and easily manage the process. It may not be your favourite time of year, but getting on top of your accounting and tax preparations early means you’ll have more time to focus on the things you enjoy.
When is EOFY and how does it work?
In Australia, tax law requires business owners to keep records of all financial transactions during the financial year, which is from the 1st of July to the 30th of June. This includes having documentation that explains how your income and expenses were calculated. You must stay up to date on any tax changes that might affect your business structure through the ATO updates, so you’re fully prepared come EOFY.
How to take on tax season with ease
Being organised and productive can make the whole tax season smoother and less stressful. Here’s how you can prepare:
1. Take time to compile all your documentation in one place
Over the year, you’ve likely collected plenty of paperwork and receipts. Whether they’re in an app, on your computer, or printed out, when tax time comes, it’s crucial to have everything in order. It’s recommended that you collect:
- A complete profit and loss statement that lists your sales and expenses
- Business activity statements (BAS)
- Employee super contribution records
- Tax return paperwork
Once you have them all, put them in one place to refer back to. Having everything ready ahead of time will help you face June with confidence.
2. Get rid of those debts
Did you know bad debts are tax-deductible when written off? You can use them to offset your taxable income. If there are unpaid invoices from the last financial year, now’s the time to consider writing them off.
For those who need to pay you, you might also want to consider offering clients a small discount if they pay before the EOFY deadline. Another option is to use an accounting software program to automatically send reminders to clients who haven’t paid on time.
3. Claim tax deductions
As a small business owner, you can deduct costs related to running your business from your taxable income. This reduces the amount of tax you’ll pay. Deductions can include business supplies, services, and depreciation of your assets. In the weeks leading up to EOFY, figure out what you can claim and make sure you can prove it with proper documentation. But, be careful not to mix personal bills with business expenses — check with the ATO before claiming at-home expenses.
If your business has superannuation guarantee obligations, paying them before 30 June will allow you to claim a tax deduction this financial year, rather than waiting until the next. Under the Temporary Full Expensing (TFE) scheme, there’s no limit on deductions, so be sure to check if you’re eligible.
4. Analyse income tax offset
If your business turnover is less than $5 million, you may be eligible for an income tax offset of up to $1,000. The ATO will calculate the tax you owe, and once processed, the offset will appear on your notice of assessment. If your turnover is under $2 million, you can also benefit from a range of tax breaks, including:
- Capital gains tax exemptions
- Goods and services tax (GST) benefits
- Income tax deductions
- Fringe benefits tax relief
5. Have deadlines written down
Staying on top of deadlines is key to avoiding ATO penalties. Mark important dates in your calendar to make sure you submit your paperwork on time. If you need support, consider hiring a financial adviser or accountant. Alternatively, the ATO has a dedicated support page for employers that you can check out.
Plan for the future
As you wrap up the financial year, it’s also a great time to plan for the future of your business. Take a look at these areas to set yourself up for success in the year ahead:
Business Plan: Check if your business plan is working and if it outlines your goals. If not, update it based on market trends and what you sell.
Business Insurance: Make sure your insurance covers what you need. Talk to a broker if you need more or less coverage.
Health and Safety Policies: Ensure your policies are up to date and that employees and equipment follow the rules.
Finances: Review your finances and check if loans and credit cards are being paid off.
Need a quiet space to do your taxes?
If you’re looking for a focused, quiet space to tackle your tax preparations, connect with Haven Workspaces. Located in the heart of Canberra, we offer state-of-the-art facilities, flexible desks, and private office spaces designed for small businesses like yours.
Contact us today and get your business for the year ahead.
