Running a small business isn’t always smooth sailing, especially at the end of the financial year but with a few manageable steps, the complexities of tax time will take less of a toll this time round:
1. Start early
Avoid the rush in July by getting your documents together early. For some businesses, this involves manually collecting an inventory of receipts, expense records, invoices or employee details to review your company’s spend. Keeping records helps you understand your business’ financial situation and for tax purposes, receipts should be kept for up to five years. Starting as early as possible is the best way to minimise stress towards the end of the financial year and will help you lodge correct statements. As you go, confirm your business records are up to date and in line with current legislation.
Lauren from Hillier’s Advisors in NSW, says businesses should always plan ahead and be organised with copies of previous years records.
“Estimate your profit and minimise your tax with some smart end of year planning. We recommend all our clients meet with us prior to 30 June to do just this,” she said.
2. Match all accounts
Reconciling your accounts ensures bank statements are consistent with your own records, helping you spot any discrepancies in spend and find duplicate transactions. Start by chasing up outstanding payments, pending invoices or unpaid refunds. When all payments are up to date, match your receipts to your bank transactions, asking for copies of receipts where necessary. When you reconcile your accounts, you will also need to consider investment accounts, unpaid or outstanding debts and any leases.
Any payment summaries should be sent to employees well before July but ensure your business’ accounts are reconciled before a PAYG summary is provided for employees. Use this chance to update employees’ current financial details and superannuation payments, also checking any termination dates and leave entitlements.
A meeting with a bookkeeper or accountant can be useful as the new financial year approaches.
3. Shop for what you need
Some business owners use this opportunity to pre-purchase service and supplies to claim a deduction but fall for the trap of spending for unnecessary items, simply for a tax deduction. Any spending for important business purposes can be used to claim a deduction.
4. Claim the right deductions
Having accurate and detailed records will help you make the right deductions and concessions for your business. While it may take you some time to delve into the details of what deductions are available, a little effort from the experts will help your business pocket extra savings this financial year.
You can claim expenses related to the running of your business -mostly for day-to-day costs or for expenses that depreciate over time but are used to improve the structure of your business. Check the ATO for more information on what expense can and cannot be claimed.
Registered businesses with an ABN and a turnover under $2 mil may take advantage of recent tax concessions and claim any assets that cost less than $20,000 if ongoing activity is demonstrated in a Business Activity Statement. According to the ATO, your business may be eligible to claim up to $300 on home office equipment, electrical costs, cleaning expenses or repairs although documentation is required to claim deductions that exceed $300.
5. Plan ahead
The end of the financial year is also a great opportunity to compare your business’ performance in the previous financial year and plan realistic business goals for the next financial year.
Lauren suggests that businesses should consider investing time and money in the right accounting software to ensure correct records and minimise the risk of tax audits and penalties.
“Be organised. If you have adequate accounting software and bookkeeping procedures, all the work should really be done for you throughout the year,” she says.
The pressure of running a small business is already a lot to handle so when the end of financial year comes around, why not leave it to the experts? From tax accountants to bookkeepers, request a free service and make the right expert connection.