EOFY is a crucial time of year for businesses to do some EOFY planning. Businesses need to be on top of their cash flow and to enable new business goals to be set for the financial year ahead. It is always great for a business to establish good financial habits as this will have positive aspect in the short term and the long term.
In order for all businesses to be ready for the end of financial year, initiating the following steps could be of benefit to your business:
To be able to claim a deduction for super contributions made to employees, ensure the super is paid before the due date for each quarter’s payment. If you want to claim a deduction for super owing in June it is ideal that it is paid before month end in order to obtain the deduction this year.
- Personal/Director Superannuation
As well as ensuring all employee superannuation is paid on time, it is beneficial for owners to also look at their personal superannuation contributions. If you are wanting to claim a deduction this year, it may be wise to make this contribution prior to 30 June 2017. When making these contributions it is important to note that a maximum of $35,000 (for people aged 49 years and over) and $30,000 (for others) can be made. However from 1 July 2017, it will reduce to $25,000 p.a. for everyone regardless of age.
- Bad Debts
This time of the year is always good to review your receivables/debtors in your business. If you are still chasing invoices from the prior financial year, now is the time to write these off to be eligible for the tax deduction. Note to remember – also make the GST adjustment for these written off amounts.
Completing a stocktake at the end of the financial year is essential in determining the correct value of your closing inventory. However it is also a good tool to work out an obsolete or damaged stock that the business could be carrying. When valuing stock you have the choice at the lower of cost, replacement or market sale price. This means that stock that is obsolete or damaged can be written off or reduced in value for tax purposes and claimed as a deduction.
- Knowing the Small Business Concessions
If you are carrying on a business that meets the definition of a ‘small business’, there are a number of tax concessions available:
- $20,000 Instant Asset Write Off
For assets that cost less than $20,000 an immediate tax deduction may be taken for the cost of the asset in the year the asset is installed and ready for use.
- Immediate deduction for business start-up costs
If a business has incurred professional fees and/or legal fees for starting a business, you may be entitled to an immediate deduction for these expenses.
- Company Tax Rate
In the 2017 financial year the tax rate for a company considered a small business (that has an aggregated annual turnover threshold of less than $10m) has a tax rate of $27.5%. This is a reduction from the 30% company tax rate in the previous financial year.
You may be entitled to an immediate deduction at 30 June 2017 for prepayments that are for a period of 12 months or less providing the period ends before the end of the next financial year (i.e. before 30 June 2018). This may offer significant tax savings if applicable.
- Reward Your Staff
The end of the financial year can be stressful for some small businesses including their staff. So it can also be a good time for employers to reward their key staff for the contribution and hard work throughout the year. Maybe a lunch or even a cash bonus – this shows your employees that they are valued and appreciated within the business. It may also be a great time to review their KPIs or budgets!
- Getting your EOFY tasks done in Xero:
Xero has published it’s 10 step process to managing EOFY which covers everything from pay runs to reconciling your accounts – check out their step by step guide here.
There’s also a really easy to watch step by step guide on how to do all your EOFY tasks in Xero. Everything you need from winding up payroll to stocktake all in bite sized pieces. Feel free to watch it here.
A reminder you will need to ensure Payment Summaries for any employees are prepared and given to them by 14th July (even if they didn’t pay any tax), and these need to be lodged with the ATO by 14th August.
More information can be found on the ATO website here.
As always if you need advice on the tax saving strategies we can implement for your business, please reach out to your trusted PJT accountant or advisor.