With the end of the financial year (EOFY) approaching, many businesses start to think about how to get ready. Checking that your accounts are in order and taking some preparatory steps in advance will save you a lot of time in the long run. Here are five accounting tips to prepare for EOFY.
What does 'end of financial year' mean?
This is a definitive report that is a statutory requirement, highlighting your company’s performance over the past twelve months. Since it gives potential investors and banks an insight into the financial circumstances of your business, it needs to be very accurate.
So, how can you prepare for this ahead of time?
1. Ensure that your records are up to date
Your financial accounts should total correctly with your bills, invoices, bank statements, and paying-in books. Remember to keep receipts for all purchases for at least five years. Tip: Read our article on 5 Bookkeeping Mistakes To Avoid This Financial Year.
You must also list your sales that are not yet paid for but made before the year-end as outstanding debtors, including the amount, invoice date, and invoice number. If you feel that some invoices won’t be paid, jot them down with a brief explanation.
2. Wages: Make sure all data is accurate
Not only do wages need to be paid, but a thorough payroll record must be kept. As the employer, you are liable for any errors in income tax. Wages also have an impact on how much corporation tax you’re paying as it affects the profitability of your business.
3. Meet your superannuation requirements
Businesses with superannuation guarantee obligations need to pay their employee contributions of 9.5%. If you meet your obligation early, you can claim a tax deduction in your next income tax return instead of having to wait until the next year. Learn more in our article ‘7 Tips For Investors This End Of Financial Year‘.
Do keep in mind that, until they have been paid, employee superannuation contributions are not tax-deductible.
4. Research what tax deductions you can claim
For most business expenses, you can claim tax deductions as long as they relate directly to earning your income. You could claim tax deductions if your business:
• Has motor vehicle expenses
• Operates at home
• Set up a website
• Has travel expenses
• Uses machinery or computers
However, you must have records to prove these expenses for your tax deductions.
If you’re a sole trader, then consider using the myDeductions tool on the ATO app to record your business expenses and income during the year.
5. Be careful of tax refund scams
Around the end of financial year tax time, there are numerous scams that target small businesses. This mainly includes tax refund scams (asking for a fee to get a refund for overpaid taxes) and tax owed scams (asking you to pay more as you’ve underpaid taxes).
If you’d like to leave it to the professionals, at Charter Partners, we can help you understand and navigate the end of the financial year for your business. We also offer services in financial planning, financial forecasting, bookkeeping, and taxation planning. Feel free to contact us on 1800 810 247 or send us an email at email@example.com.
Anthony McPhee, Principal
B.Bus (Accy) QUT | FCPA, SSA (SMSF Specialist Advisor with the SMSF Association) & Registered Tax Agent
Anthony has over 25 years accountancy, taxation and superannuation (SMSF) experience. He eagerly welcomes a challenge and his passion is in small business accounting, superannuation, consulting and taxation advice. He provides real business benefits for each of his clients and is well regarded for his succinct and accurate accounting skills. Anthony is also a self-managed superannuation fund (SMSF) specialist with Australia’s leading SMSF body, The SMSF Association.