For small businesses, the 2018/19 finish line is in sight. At midnight on 30 June, the financial year ends, the books are closed and businesses report their financial situation to the Australian Tax Office (ATO). Here are five tips to help small businesses make the most of this busy time and keep stress to a minimum.
By 1 July 2019, all employers must begin using Single Touch Payroll (STP), which is a new reporting requirement introduced by the ATO. If you’ve already opted in to STP, all you need to do is finalise your payroll figures. The good news is that STP makes this year-end task much less of a chore than in days past.
If you’re in the market for new business assets, one of the biggest tax breaks available to small businesses is the newly enlarged instant asset write-off. Whether you need a vehicle, plant equipment, or other work-related machinery, up to $30,000 of the purchase price can be immediately written down.
The end of financial year (EOFY) is also the time to review your fixed assets. You’ll want an accountant to help you manage the depreciation and disposal of your business assets during the year. You should keep a record of all assets purchased, and have your advisor set up a register to record and depreciate your fixed assets.
In the course of a year, a small business can accumulate a decent-sized paper trail – even if you’ve moved your accounting to the cloud. Do yourself a favour by following up on the year’s quotes, draft invoices and billable expenses so you can start the new year with a clean slate.
It always pays to plan ahead, so make sure you have the necessary documents ready. Your accountant or bookkeeper will tell you what records they need, but if in doubt, simply check the ATO’s list of EOFY essential tasks.
EOFY is a good time to check your inventory. For businesses with turnover less than $10 million, you’ll need to conduct a stocktake if you estimate the difference between your stock level at the beginning and end of year is more than $5,000, according to the ATO. You can claim a deduction for most expenses you incur on buying, maintaining, repairing and selling business assets or stock, either immediately or over time. As well as the stock you sell, you’ll want to include buildings, fixtures and fittings, plant and equipment, cars and trucks, office equipment and computers. Stocktakes can impact your tax planning, so it’s always a good idea to consult your accountant beforehand.
For the new financial year, try to set up systems that limit the amount of work you have to do at tax time. Technology such as cloud accounting software can:
Also, ask your accountant to come up with a tax plan for the new year. They’re in a much better position to lower your tax bill if they can create a 12-month strategy.
Matthew Prouse, Head of Industry, Xero