7 tips to help you prepare for end of financial year (EOFY)
The end of the financial year (EOFY) is looming but with some planning and preparation, it need not be an exhausting time for small business owners. This EOFY checklist may help you meet your legal obligations and assist you in getting the right tax outcomes for your business.
Having important paperwork in place helps to streamline the EOFY process. Some examples of records you need to keep are:
Both EOFY and BAS (business activity statement) 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.
If you’re registered for online banking, you may have access to tools that will assist you with everyday bookkeeping and gathering information for your tax return. For example, Westpac online business banking offers:
All these online banking features are designed to save time and streamline admin, while assisting with BAS and tax return preparation.
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. As a result of the COVID-19 situation, the threshold of the initiative has been increased from $30,000 worth of asset purchases to $150,000 for the 2019/2020 financial year.
Therefore, now’s the time to consider whether you will need new office equipment in the coming year, or if existing equipment needs to be repaired or replaced. Note that any such assets need to be installed and ready for use by 31 December 2020, and assets costing between $30,000 and $150,000 are only eligible if they had been ready for use between 12 March 2020 and 31 December 2020.
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. To help avoid the need to visit a branch, primary producers can now renew and manage Westpac Farm Management Deposits online.
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.
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.
Businesses with superannuation guarantee (SG) obligations are required to pay employee contributions of 9.5%. Meeting your obligations early, by 30 June 2020, will allow you to claim a tax deduction in your 2020 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.
Put all the required dates in your calendar to give yourself a reminder that will help you avoid ATO penalties.
Pulling together everything you need for your tax return can be arduous, but we hope this article has helped. It’s also important to remember that some actions must be considered and taken before the 30th June.
1. Not all accounts are eligible to be included in a bank feed. These can include loan accounts and accounts requiring multiple authorisations for transactions. Bank Feed must be set up with Third Party Service Provider before it can be connected in Westpac Live. If your Third Party Service Provider does not appear in the drop down menu in Westpac Live, you may need to check that your provider is registered with Westpac. Should there be any changes in your user access or network access levels, you may need to disconnect your Bank Feed(s) as any access changes will not impact bank feeds. The products and services offered by these Third Party Service Providers may be subject to terms and conditions and fees and charges. Westpac does not guarantee or endorse the services or products offered by these Third Party Service Providers. Westpac’s products are subject to terms, conditions, fees and charges; and certain criteria may apply. Before making a decision, read the disclosure documents for your selected product or service, including the Product Disclosure Statement and T&Cs for Westpac business bank accounts, foreign currency accounts, Farm Management Deposits and online banking; and consider if the product is right for you.
The information in this article is general in nature and does not take your objectives, financial situation or needs into account. Consider its appropriateness to these factors; and we recommend you seek independent professional advice about your specific circumstances before making any decisions.