The end of financial year (EOFY) can be a stressful time for small business owners, especially if everything is left to the last minute. With June 30 fast approaching, it’s essential for small businesses to be across their entitlements and obligations, so they can neatly wrap things up and get a great start on the year ahead.
Getting on top of all this paperwork won’t just benefit you at EOFY, it will also offer you a clearer picture of the business to help with ongoing tax and strategic financial planning.
Ben Thompson, Co-founder and CEO of people-management platform, Employment Hero, said:
Know your entitlements
“Running a small or medium-sized business can be tough, but thankfully the Australian Tax Office (ATO) offers a wide range of concessions, which can give your business a shot in the arm.
“Even if you think you know all of your entitlements, it’s worth checking again because more businesses are now eligible for small business tax concessions. In many cases, your company tax rate may have also reduced. The small business income tax offset has also increased.
“Depending on your aggregated turnover, there are a range of other benefits when it comes to deductions. You might be able to take advantage of concessions such as instant asset write-off, accelerated depreciation, temporary full expensing, immediate deductions for prepaid expenses and deductions for professional expenses for startups.
“Along with saving you money and reducing your tax bill, you can also ease your EOFY stress by taking advantage of ways to simplify your paperwork. This includes simplified record-keeping, simpler Business Activity Statement (BAS) calculations and some exemptions for capital gains and fringe benefits tax.
“As a small business, you can pay your Pay As You Go (PAYG) instalments using an amount calculated by the ATO. This makes things quick and easy because you don’t have to work out the instalments yourself.”
Update your records
“Now is the time to get your paperwork in order, rather than go through a mad scramble at the EOFY. It’s important to have all your receipts in order – if you’re still keeping them in a shoebox, only dealing with them at tax time, then it’s time to update your finance system.
“This is especially important when it comes to depreciation. You must keep records of depreciating assets for as long as you have the asset, and then another five years after you dispose of the asset. You’ll need all of this paperwork if you want to take advantage of the accelerated depreciation rules introduced to help businesses through the pandemic.
“You’ll also want an up-to-date summary of your debtors and creditors, especially if your business has taken advantage of the temporary safe harbour legislation to help businesses stay afloat during the pandemic.”
Reconcile your accounts
“Every bank transaction needs to be reconciled so you have a clear picture of what happened this financial year. The longer you put off reconciling your accounts, the longer it takes and the more difficult it becomes to match transactions.
“Remember, along with your business account and card credit, you also need to reconcile loan accounts and petty cash accounts. Retailers should also regularly reconcile their cash drawer or undeposited funds account. If you’re using electronic banking or clearing, this also needs to be reconciled.
“Regularly reconciling your accounts helps you pick up small errors and discrepancies before they become big problems, which are very difficult to untangle. The process is much easier if your finance system can pull in your bank feeds and match up transactions, which speeds things up and reduces the chances of errors.”
Phillip Bernie, Head of Product – Payroll, at workforce management and payroll solution, KeyPay, said:
Finalise your payroll
“Finalising your payroll is a key step which must be completed before issuing payment summaries at EOFY. Payroll errors due to coding or processing issues can result in incorrect employee payment summaries, as well as incorrect values in the General Ledger.
“The introduction of Single Touch Payroll has transformed the way employers report wages, superannuation and PAYG to the ATO – so it’s important to be on top of this. Further changes with Single Touch Payroll (Phase 2) will reduce paperwork for employers, while making it easier for employees to understand their payslip.
“Remember also, the removal of the $450 monthly income threshold on superannuation means you might need to start paying super to workers who weren’t previously eligible.”