The end of the financial year is just around the corner, so it’s time to start getting your small business ready! By being organised and prepared, you can ensure that your business complies with all tax requirements and minimise stress come EOFY time. We will discuss some key things you can do to prepare your business for EOFY.
Understand Tax Record-Keeping Requirements in Australia
It’s essential to keep accurate records of your income and expenses throughout the financial year. This will make meeting your tax obligations much easier when the time comes. The ATO requires that you keep records for a minimum of five years, so it’s a good idea to set up a system that works for you and stick to it. This may mean keeping physical records or going digital – whatever works best for you.
Reconciliation is a necessary process that ensures your records are accurate. This involves comparing your financial records to an independent source of information, such as your bank statements, to check that they match. It’s a good idea to reconcile your accounts every month, but it’s crucial to do so at the end of the financial year. This is important because it helps you to identify any errors or discrepancies in your records and make sure that all transactions have been accounted for and also allows you to identify any fraudulent activity. Reconciliations are crucial to ensure the general ledger and financial statements are accurate.
Ensure Your Business Activity Statement Is Accurate
If you’re registered for GST, you must lodge a business activity statement (BAS). Dependent on the size of your business, this may need to be done monthly, quarterly or annually. Make sure you are aware of the lodgement dates and have all the required documentation on hand. This includes sales invoices, receipts and bank statements. The BAS is used to report your GST liability and claim any GST credits you may be entitled to. It is also used to report PAYG instalments, PAYG withholding amounts and other taxes you may owe. It’s a good idea to review your BAS before lodgement to ensure everything is in order and compliant with the ATO’s requirements.
You can find more information on lodgement and payment deadlines on the ATO website.
Taxable Payments Annual Report
If you’re in the building and construction industry or provide cleaning services, road freight transport, couriers services, Information Technology services or security, investigation or surveillance services, you may need to lodge a taxable payments annual report (TPAR). Contractors include subcontractors, consultants or independent contractors. This report tracks contractors’ payments and must be lodged with the ATO by the 28th of August.
You will need to include the following information in your TPAR:
– The name, ABN and address of the contractor
– The total amount paid to the contractor
– The GST amount included in the payments
– The payment date
You can find more information on the ATO website to find out if you are required to lodge and how to prepare a TPAR.
Finalise Employee Income Statements
If you have employees, you will need to finalise your payroll for the financial year and ensure that all superannuation contributions have been paid. Employers must make super contributions to their employees every quarter and are required to use single-touch payroll (STP). The due dates for lodgement and payment are:
- The 28th of April – For the quarter ending the 31st of March
- The 28th of July – For the quarter ending the 30th of June
- The 28th of October – For the quarter ending the 30th of September
- The 28th of January – For the quarter ending the 31st of December
You must finalise your employees ‘ records for the EOFY by the 14th of July. This will ensure all super contributions have been paid, leave entitlements have been processed, and any fringe benefits have been reported. You will then be ready to finalise and provide Income statements to your employees, which they can access through their myGov account.
Conduct a Stocktake
Businesses must conduct a stocktake at the end of each financial year to account for any stock that has been sold, used or disposed of. The stocktake will also identify stock that has been lost, stolen or damaged and is no longer usable. This is important for businesses as it ensures necessary adjustments are made and that the correct amount of stock is included in your end-of-year accounts. A stocktake can be time-consuming, so planning and allowing enough time to do it properly is essential. Small businesses with a turnover of less than $10m and the stock value have increased or decreased by less than $5000 may be eligible to use the simplified stocktake method. This means you do not have to conduct a formal stocktake at the end of the financial year and are not required to account for the change in stock value.
Prepare Financial Reports
Prepare your annual financial reports, including your profit and loss statement and balance sheet. This will give you a clear overview of your business’s finances and help you plan for the next financial year.
Review Your Bookkeeping Processes
Now is an excellent time to review your current record-keeping system to see if any improvements can be made and ensure that all necessary records are being kept. This is especially important if you move to a new system or format.
This may include streamlining your process, setting up automated backups or switching to a paperless system. The more organised you are, the easier it will be to do your tax return come to EOFY. There are many apps and software programs available that can make record-keeping easier.
Plan for the Next Financial Year
EOFY is a busy time for small businesses, but it’s essential to take the time to prepare for the next financial year. By doing so, you can ensure that your business is ready for whatever comes. This includes setting goals, preparing budgets, reviewing your business processes and taking into account any legislative changes that may occur. Some things to consider are:
Make sure that your insurances are up to date, review whether you have the correct cover for your business, and see if you can get a better deal.
Loans and financing
Review your current loan terms and conditions and compare them with other lenders to ensure you get the best deal. You may also want to consider refinancing your loan to see if you can get a better interest rate.
Budgets and forecast
Prepare budgets for the next financial year and forecast your cash flow. This will help you make informed decisions about your business and ensure you are prepared for unexpected expenses.
From July 2023, the minimum super guarantee will increase from 10.5% to 11%. This will mean that you will need to ensure that your employees receive the correct amount of super.
Wage increase a new increase for 2023 has not yet been announced
The fair work commission has announced a 5.2% increase in the minimum wage, which will go from $20.33 per hour to $21.38 per hour, those on award rates will see a 4.6% increase; these changes will come into effect on July 2022
Review your prices
Reviewing your pricing with high inflation and wage increases is essential to ensure you are still making a profit. This may mean you will need to increase your prices to cover the increased costs and ensure your sustainable pricing model.
A number of tax changes have been announced in the 2022-2023 Federal Budget that will affect small businesses. This includes tax breaks for digital adoption, reduction in fuel excise, lower tax instalments, improvements to PAYG instalments to help businesses manage their cash flow, and improvements to reporting taxable payments to the ATO. Consider temporary full expensing and loss carry-back to boost cash flow and invest for the future, which is available until the end of 2022- 2023 FY.
Review and update your business plan to reflect any changes in your business. This will help you stay on track and ensure that your business is heading in the right direction.
Review your business processes and make sure that they are efficient and effective. This includes your marketing, sales, accounting and administrative processes. As well as reviewing your current software and systems to see if they are still fit for purpose or if any new products on the market would be a better fit for your business.
Update your website and social media
Ensure that your website and social media are up to date and reflect any changes in your business. This includes your products and services, as well as your contact details.
Here Are Some Handy Resources and Tips to Help You Get Through EOFY:
- The Australian Taxation Office (ATO) has a range of resources and tools to help small businesses during the EOFY. These include:
- The ATO app allows you to track your tax obligations and stay up to date with the latest tax news
- Small business news, which provides updates on the latest tax changes and developments
- EOFY checklist, which helps you to ensure that you have everything for the end of the financial year
- Tax tips, which offers advice on a range of tax-related topics
- Keep track of your expenses throughout the year so you don’t have to scramble to find them come to EOFY
- Use accounting software to make the process easier Xero, MYOB or Quickbooks
- Stay organised and keep on top of your paperwork. An array of apps can help with this, such as Dext, Expensify, Hubdoc, Shoeboxed and many more.
- Seek professional advice – Accario can help! We have a range of services to help businesses with their accounting and tax obligations. Contact us today to find out more.
We hope that this blog has helped get you started on preparing for EOFY. An efficient and organised small business is a successful small business. By preparing for the end of the financial year, you can ensure that your business is ready for the new financial year. If you have any questions or need assistance, please don’t hesitate to contact us. We’re here to help!