Getting ready for the EOFY: A how-to-guide for businesses
Mon 3 June 2019 - 9:52 amAdvice | Expert | Featured | Small Business | Tax | Tax, Accounting and Bookkeeping
By Mark Chapman, Director of Tax Communications with H&R Block
With just a few weeks remaining until the end of financial year, many businesses will be taking stock of the year just gone and planning for the year ahead.
So what are some of the key issues your business might be facing as it looks to the end of the financial year and what last minute planning can be undertaken to get your business off on the right foot next year?
Here’s my guide to getting ready for tax time for your business.
Invest, invest, invest!
As a general rule, the best time to invest is just before the end of financial year. That way, you’ll minimise the time between spending and claiming the resulting tax deduction and in addition, many businesses run competitive EOFY specials around that time.
In addition, you should have a good idea how the business has performed against budget over the course of the year and if you’ve had a good year, there might be money left in the kitty.
The instant asset write-off allows businesses to claim an immediate deduction for capital items costing less than $30,000 (recently increased from $20,000, with effect from 2 April 2019). From a cash flow perspective, that’s a great deal and better still the instant asset write-off is now available for businesses with a turnover of up to $50 million (previously, only businesses with a turnover up to $10 million could take advantage).
In short, whether its new technology items like computers, laptops and phones, items of plant and equipment or office furniture, your business can make a purchase now and write off the whole cost in the 2019 tax return.
In the current business world, it’s essential to invest in your business to keep that cutting edge over your competition. In simple terms, even the smallest business is likely to lose time if they are using IT equipment which is obsolete, which in today’s terms means anything over 2 or 3 years old. Time, as they say, is money. So, whether it’s the technology you use to keep your business connected to the world, or the equipment you use to undertake your contracts, you can get a real boost to productivity and profitability if you invest in the best kit you can afford.
Get your records up to date…and keep them that way!
Obviously, if you keep up with your bookkeeping, you’ll make it easier to comply with your tax obligations. But beyond that, staying on top of your record keeping helps you to really understand how well you are doing as a business. It’s a common story that small business owners work every hour that’s available but don’t actually seem to be making money. That’s often because they aren’t controlling their cash flow – they are paying their debts but their customers aren’t paying them, and sometimes business owners simply don’t get that point because they aren’t paying any attention to their financials. That’s one of the key reasons I see that small businesses go bust in their early years. So, keeping your books up to date and understanding what they are telling you can be the key to survival for small businesses.
If you don’t keep proper books, first of all you limit your capacity to claim deductions because all deductions need to substantiated. Secondly, you leave yourself open to audit by the ATO. If your business performance doesn’t stand up to scrutiny, the ATO will want to see your books and records and if you don’t have them, or they aren’t sufficiently clear and complete, you can expose your business to penalties if the ATO decide you’ve underpaid tax.
So, take time over the next few weeks to get your books and records up to date and make a note to keep on top of your recordkeeping next financial year. If you’re not comfortable with book-keeping consider using a third-party bookkeeping service like the one offered by H&R Block.
On more tip from me, for free. Year-end tax planning has its place but if we’re being honest, if you’re taking important financial decisions in the final few days of the financial year, you’re not really planning; you’re simply reacting to opportunity. So, by way of a new financial year resolution, make a diary note to organise a meeting with your accountant early in the new tax year to do some structured, longer term planning for the year ahead. Assess your business and personal financial goals for the year and understand what you can do to meet those needs. Whether that includes growing your business, improving productivity or planning for an exit, you need time and good advice to put the plans in place that will enable you to meet your goals.
Mark Chapman is Director of Tax Communications with H&R Block. He is the author of “Life and Taxes: A Look At Life Through Tax” and has over 25 years of experience as a tax professional in both the UK and Australia, specialising in tax for small business and individuals.