End of financial year (EOFY) is a stressful time for any business. EOFY means satisfying tax obligations such as; records for deductions, bookkeeping, tax returns and planning for the following financial year, compliance updates and lots of other adhoc tasks, but there are other key aspects during this time your business should consider.
For bigger or growing businesses, EOFY is also an important time for strategic planning. Here are some tips for the mid-market in 2022:
1. Review recordkeeping processes
Accurate recordkeeping processes aren’t just essential for legal purposes under the Australian Tax Law, but it can be important for reducing significant costs or administration burdens within your company. For this reason, many growing organisations are turning to cloud-based enterprise resource planning (ERP) solutions, to ensure recordkeeping processes are efficient and effective.
2. Review key financial reports
Some include:
- A summary of income and expenses in a Profit and Loss Statement
- Stocktake of existing inventory and other assets to determine market value
- Summaries of debtors and creditors
- Asset purchases or expenditure for depreciation, expense claims and capital gains tax calculations
- Previous income tax returns
- Superannuation payments
- A summary of Fringe Benefits Tax payable
- A summary of Good and Services Tax
3. Account for any tax liability considerations
Tax is an inevitable part of being in business, but at this time of the year, business owners and their advisors will taker time to review their liability and consider policies to help reduce it.
Common tactics used for this purpose may include:
- Reviewing remuneration packages to ensure they are tax effective
- Reviewing inventory for obsolete or damaged stock that needs to be written off
- Processing any Fringe Benefits Tax contributions
- Using business structures to a tax effective way that protects your assets
- Maximising superannuation contributions and deductions
- Making the most of write offs for assets and bad debts
4. Check eligibility for Temporary Full Expensing and Loss Carry Back
Your business may be eligible to claim Temporary Full Expensing or Loss Carry Back in this year’s tax return.
Temporary Full Expensing allows eligible businesses to deduct the business portion of the cost of eligible depreciating assets that have been purchased and installed before the end of the financial year.
The Loss Carry Back measure enables eligible businesses to receive a refundable tax offset if they choose to carry back losses made in the last financial year.
5. Make the most of Government support payments
A number of government payment have been made available in response to recent natural disasters and COVID-19. Examples of these payments include:
- Fuel tax credits or product stewardship (oil) benefit
- Wine equalisation tax producer rebate
- Jobkeeper payments
- Supporting Apprenticeships and Trainees wage subsidy
- Excise refund scheme for alcohol manufactures
- Grants, such as an amount you receive under the Australian Apprenticeship Incentives Program
- Subsidies for carrying on a business
- Assessable payments you receive from government entities for services you provided or grants you have received
- Read more about government payments here.
6. Perform a whole-of-business review
EOFY is the perfect time to look at where your business has been and where it is going.
Question that will be asked by finance leader include:
- Current financial position
- How has the pandemic impacted the bottom line?
- Is the business performance in line with expectations?
- Are investments providing the returns you were hoping for?
- A year-on-year comparison
- Financial forecasting to consider where the business will be in 12 months from now
- Whether insurance cover is adequate given current conditions
- Whether there are any business or investment opportunities worth pursuing
EOFY is the best time to consider the overall health of your business, and strategically plan for the next financial year and beyond.
Source: MYOB