The end of the financial year – EOFY – can often be a busy time for small business owners, with all business accounting needing to be finalised, tax returns completed and submitted as well as planning for the year ahead. It’s not all bad news, however, as tax time is the perfect opportunity to reassess where your business is at and where you want it to be.
Below are a few tips to help you get through the period as easily as possible, hopefully save your business some money and plan for an even better year ahead.
Get your records organised early
An important part of being a small business owner is ensuring you are compliant with all business laws, including those about record keeping. You will need to:
- summarise your income and expenses in a profit and loss statement
- list your debtors and creditors
- show records of your asset purchases to calculate depreciation expense claims for capital gains tax, and
- complete a Business Activity Statement – a bookkeeper or accountant is your best friend here.
Consider keeping electronic records stored in the cloud, to save yourself time and space.
Understand your employee commitments
Everyone employed by your business – including yourself – will need to receive a PAYG withholding payment summary annual report to be able to lodge their personal tax return. You’ll need to reconcile your payroll and provide these payment summaries to your employees by the due date in July.
Before you provide PAYG summaries, reconcile the totals to your business accounts first. EOFY is also a great time to check your business insurance requirements. If your business circumstances have changed, you may need to update your level of cover.
Plan ahead
Another part of recordkeeping, is recording your stock levels. If your business buys or sells stock you will have to conduct a stocktake, because the value of your stock plays a role in determining your profit or loss for the year.
Conducting a stocktake is often a long and laborious task for any business, so plan ahead, communicate with your customers early if your stocktake will require you to change your business hours and make sure you don’t leave it until the last minute.
Know what you can claim
You don’t want your business to miss out on potential tax deductions, so make sure you’re clued up about you can claim. The majority of costs you incur whilst running your business can be claimed as a tax deduction, as long as they directly relate to earning your income.
The 2016 Federal Budget introduced changes to the Small Business Equity concession, increasing the threshold from $2 million to $10 million in annual turnover. As a result, next financial year many more business owners will now be able access to the small business concessions, such as access to the immediate deduction for assets costing up to $20,000 and the ability to account for tax on a cash basis.
Use what you’ve learnt
With all the information about your business updated and in one spot, EOFY is a great time to take stock and reflect on the year that has passed. I suggest sitting down with your accountant or bookkeeper to critically review your finances and discuss what you could change next year to improve.
It’s also a good time to set goals for the new year and to review your business and marketing plans to ensure they are still appropriate for the size or stage your business is in.
Trent Innes, Managing Director, Xero Australia
