The End of the Financial Year is creeping up on us, and it represents a time of stress for businesses and individuals alike. Paying tax, filing for returns, straightening up the books – it’s a chore that can quickly become a nightmare. But it is manageable. Hippo has some tips to help this EOFY and the next pass as smoothly as possible for you and your business. 

Beware of the Due Dates

The financial year ends on June 30th. That’s the last day to consult your accountant, contribute to your superannuation, or purchase something tax-deductible for your business. There are several other due dates to watch out for: 

• 14th July -> Employers must issue PAYG withholding payment summaries to payees. 
• 28th July -> Final day to make GST instalment payments before EOFY. 
• 1st July -> Start of new Financial Year. 
• 14th August -> Final date to lodgement of PAYG withholding payment summary annual report. This is to summarise all payments made to employees and contractors, plus the amounts withheld from salary and wages. 
• 28th August -> If your business makes payments to contractors, you must lodge a Taxable payment annual report (TPAR) by this date. 
• 21st of each month -> FInal date for payment and lodgement of activity statements every month. 

These are the primary dates to be aware of, but there are many more. Make sure to check the Australian Government’s EOFY page for further information. 

Essential Tasks

Whether they’re tasks you neglected throughout the year (oops), or things you’re on top of, there’s a solid list of duties businesses need to have done for EOFY. Here are the things you need to do in order for EOFY to pass easily:

• Reconcile accounts and payroll 
• Review working capital
• Gather all tax return paperwork together and prepare it to lodge a company tax return 
• Gather, organise, and reconcile financial records to generate the necessary figures to fill out your tax report
  • Primary reports for companies are the Profit & Loss Statement, and a balance sheet
• Know what deductions you can claim, especially with the current COVID-19 allowances 
• Write off bad debts
  • Claimed a tax deduction for bad debts allows you to claim a GST payment 
  • It’s necessary to present evidence of the debt’s irrecoverability and previous actions taken to try and recover it
• Bookkeeping tasks
  • Employee payment summaries, which must be sent to employees 
  • Declutter your books and order your accounting file 
  • Review monthly and annual subscriptions that the business has
  • Ensure your paperwork is up to date 
  • Perform a stocktake and write off anything that has been lost of damaged 
  • Prepare a Taxable Payments report for the ATO (for construction industry) 

It’s fantastic to have a company accountant and bookkeeper for many of these tasks. If your business already has one on the payroll, they will have most of this information prepared. 

EOFY Changes casued by COVID-19

Due to Australia’s ongoing economic recovery from COVID-19, several of the tax changes made during 2020 are still in place. It’s expected that many business statements’ will show profit fluctuations – some may have dipped down into the tax-free threshold, while some may have exceeded it. 

There are concessions in place for suffering businesses. If a company’s turnover has significantly dropped, they’re able to receive a reduced tax rate: 26% instead of 27.5% for those with an aggregated turnover of less than $50 million. Additionally, because of stimulus measures extending into FY2021, there are more cash flow impacts to monitor. That means ensuring your records are up to date – but don’t worry, there’s still time!

Something else to keep in mind is JobKeeper. It is taxable for your business, but can be claimed as an expense when paid to employees! However, JobKeeper is also taxable income for your employees, so make sure to check that tax was withheld from these payments on their behalf. 

Another change to look out for is the increased instant write-off scheme. Businesses can currently write off purchases of up to $150 000. This scheme will be applicable past 2021 under the name Temporary Full Expensing and projected to last until 30 June 2023, which is fantastic news if you’re looking to expand. 

Making the Most of EOFY

There are a few ways to make EOFY work in your favour. Maximising tax returns is one of the best, and there are several ways to do it:

• Paying ahead for expenses, bringing them forward into the current financial year and offsetting tax liability 
• Pay annual subscriptions and professional body membership fees in the current year so they can be claimed immediately 
• Make a list of your deductible expenses (e.g. setting up a website, work travel, etc) and ensure they’re filed
• Keep track of the expenses made for the company, as many can be claimed on a tax return
  • E.g. advertising, motor vehicle expenses, office supplies, equipment hire, accountancy and bookkeeping, telephone and communication devices 

It’s also possible to reduce the number of tax payments your business has to make by doing some of the following: 

• Donate regularly to a registered charity 
• Voluntary super contributions 
• Pay upcoming expenses before the 30th of June 
• Purchase necessary company equipment before the 30th of June (and make the most of those EOFY sales!) 
• Pay fourth-quarter super contributions before 30th of June, instead of waiting for the 28th of July 
• Defer income until the 1st of July to reduce your 2021 taxable income 

Preparing for the New Financial Year

Start the new financial year by showing your clients how seriously you take their work. Ask them what their financial year plans are for the next twelve months, and ensure their ideas line up with the goals you’re helping them reach. 

Communicating with clients is all about building trust. Be proactive. 

Disclaimer: This information is highly generalised, and does not constitute professional financial advice. If you plan to follow through on any ideas presented in this article, ensure you consult an accountant and perform adequate independent research.