Tax time: preparing for the end of financial year
It’s tax time! The end of financial year is looming, but don’t panic. There is still time for you to get on top of your end of financial year responsibilities. Follow these tax tips and you will be on your way to financial freedom.
Ideally throughout the year you have undertaken regular tasks to ensure your financial statements are up-to-date. However, we know that small business owners like yourselves are time poor and you may have not found the time to be that prepared.
Yes, the end of financial year can be a stressful time—and more so if you have left it to the last minute—but with careful planning, even setting a schedule, it is possible to reduce the stress and lessen the impact of 30 June. It will also allow time to focus on planning for 09/10.
At the end of June you (and every business owner) face end of financial year tasks, and you also need to complete your final Business Activity Statement (BAS) for the year. We expect you will soon be meeting your accountant to prepare for the end of financial year. To be ready to provide all the relevant information to your accountant we suggest that now you should be reconciling your:
- Bank accounts
This leads in to completing your quarterly or annual BAS statements at the end of June.
At the same time as completing your BAS statements, you should also reconcile your payroll. You will need to generate payment summaries and distribute them to your employees before 14 July 2009.
Don’t feel daunted by this, if you are not able to complete this work yourself, your accountant or bookkeeper will be able to assist you. If you don’t use a bookkeeper, some accounting software providers run classes or have information available on how to complete this work.
Once all your data entry and reconciliation has been completed the end of financial year reports can be run after 30 June. To understand what you need to provide to your accountant for the end of financial year wrap-up, request a checklist from your accountant (they will be able to provide you with a checklist that best represents your business situation).
However, for your business’ tax return, the most common reports (for most software) that your accountant will need include:
- Profit and Loss Statement for the financial year
- Bank Reconciliation report
- Balance Sheet and Trial Balance
- General Ledger report
- Receivables Reconciliation report
- Payables Reconciliation report
- Inventory Value Reconciliation Report
- GST reports for the June month or quarter
Having your paperwork organised and preparing your end of financial year documents before seeing your accountant to go over your tax, not only makes life easier but saves you time and money. Once all the documentation is ready, remember to back-up all your data for your record-keeping requirements. The ATO requires that you keep copies of your accounting records for at least five years.
Preparing for 09/10
Every year the Federal Government implements some changes to the compliance requirements for small businesses. One compliance change that small business owners need to be aware of for 09/10 relates to superannuation (Reportable Employer Superannuation Contributions) and the way it’s reported. Essentially these changes relate to superannuation over nine percent that the employee can influence, such as salary sacrifice or employer additional payments. From 1 July 2009, you will need to report these additional payments on employees’ payment summaries.
There will also be several other compliance requirements. The ATO will have full details and explanations for small business owners, or alternatively your accountant will also be able to advise you of the compliance changes and how they affect you.
If you are using accounting and payroll software, then you will need updates to address all the compliance changes. Therefore, you need to ensure you are scheduled to receive compliance updates so that you meet the changed compliance requirements from 1 July 2009.
Realistic planning for 09/10
Even though your focus is on the end of 08/09, the new financial year presents an opportunity to implement new work practices to set your business up to work smarter. Making improvements to your work processes now will ensure that preparing for next end of financial year will be less stressful than this one. Generating new business and maintaining existing customers is a common concern for business owners. Planning for the end of financial year should allow more time for this.
Some areas to consider improving your work processes to make the 09/10 end of financial year easier include:
- Business planning and goal setting
- Budgeting and setting realistic financial goals.
You can track how you are going in meeting these goals by:
- Keeping all accounts and records up-to-date (maintain data entry into your accounting and payroll software)
- Running year-on-year comparative analysis reports
- Monitoring and managing your cashflow, with a particular eye on your debtors (people who owe you).
Finally your end of year processes will be helped if you stay on top of your inventory and follow tasks lists and schedules, which will ensure you are regularly performing the core administration functions (for example, a task list from your accountant or bookkeeper for BAS, end of financial year, etc).