Last Minute EOFY Tips For Tax Success
As the calendar flips around to June 30, time is running out for salons, spas and clinics to prepare for the end of financial year. This can mean added pressure and stress but it doesn’t need to be the case.
If you have been procrastinating on your taxes until now, Australian accounting software company Reckon has some 11th hour advice to help get your accounts in order and remain on top of your finances.
While early planning and being organised is best, it is not too late to maximise deductions as part of effective tax planning, try to shift old stock and connect with your accountant.
Take advantage of tax deductible expenses
If you’re a Small Business Entity (SBE) with an aggregated turnover of up to $10 million, and thinking of purchasing a piece of equipment before June 30, 2018, keep in mind you can immediately deduct the cost of eligible assets up to $20,000.
Be sure to finalise your purchase soon if choosing to take advantage of the write-off this financial year.
SBEs should also be aware they are entitled to bring forward deductions on expenses for the next financial year, known as prepaid expenses.
This is available where those services will be provided within 12 months of the date of expenditure.
Deductible expenses would normally include items such as office supplies, stationery, insurance and rent.
Certain types of expenditure are excluded from prepayment rules, including amounts of less than $1,000 and payments of salary and wages.
It’s worth evaluating your business profits and seeing if taking a deduction in advance is beneficial.
Review debtors and write off bad debts
Like many small businesses, you may have accrued bad debt in the past as the result of unpaid invoices.
One option to address bad debt is to write it off, this may provide your business with a tax deductible expense.
The amount owing must be 12 months overdue to be classified as bad debt and the debt must be written off during the year.
Make sure you try all options for collecting your Accounts Receivable balance before deciding to write off bad debt as it will impact your profit.
Give a little
Charity contributions can be tax deductible, so now is the ideal time for small businesses to think about making a difference to a worthy cause.
Check your donation is for an organisation with a deductible gift recipient (DGR) endorsement on the ABN Lookup, and you are able to declare anything above $2.
Keep track of your donations and you might find you have not only helped someone else but also helped reduce your tax as well.
Keep detailed records
Have a system place to keep track of receipts, invoices and even a decrease in the value of your inventory found during a stocktake. Remember, the ATO requires businesses to keep records for at least five years.
If you’re using online accounting software, record keeping is easy as it backs up to the cloud. This will protect your business from losing valuable information through a computer failure or misplaced papers.
Ask an expert
If you operate solo or run a small business, it can be tempting to take tax matters into your own hands.
However, I encourage you to chat with your accountant or bookkeeper in the next week, especially if there’s anything you don’t understand.
A professional will cost money, but in the long run they will help you gear your business towards growth by putting in place a plan to best minimise your tax burden and take advantage of small business incentives.
If you happen to be a Reckon customer, our Find a Partner website can help you locate an accountant or bookkeeper in your area.
Ensure BAS, employee wages and super are up-to-date
If your business is registered for GST, you need to make sure your business activity statement (BAS) information is up to date.
If you have employees, now is a good time to complete their pay-as-you-go (PAYG) tax reconciliations, and ensure their superannuation contributions are up to date.
Remember, super is not tax deductible until it has been paid, so it is important to ensure all super contributions for employees are completed by the end of the financial year.
For more guidance, see the ATO’s example on how timing of super payments affects the claim year.