EOFY Australia: Your Essential Guide to Tax Time Success
June 30th signifies the conclusion of the Australian financial year (EOFY), a key period for both individuals and businesses. For businesses, we’ll explore key dates, tax return types, and effective strategies to maximise deductions and minimise your tax burden. The preparation for EOFY benefits business owners by ensuring accurate financial records, maximising tax deductions, and improving cash flow management. It helps identify financial health, streamline compliance with tax laws, and avoid penalties, reducing stress to business owners. Timely EOFY prep also helps plan for future growth and simplifies the grant application process.
Key Dates and Deadlines:
The Australian Taxation Office (ATO) sets deadlines for lodging tax returns. Here’s a quick rundown:
- Individual Tax Returns: Due by October 31st (with potential extensions).
- Company Tax Returns: Company tax returns are generally due by February 28th.
Types of Tax Returns:
Depending on your involvement in business, you might need to lodge different types of tax returns:
- Company Tax Return: This applies to registered companies, reporting their taxable income and tax payable.
- Partnership Tax Return: This is for businesses operating as partnerships, reporting the partnership’s income and each partner’s share.
- Trust Tax Return: This applies to trusts, reporting the trust’s income and how it’s distributed to beneficiaries.
Combining Business and Personal Returns: Can Business Owners Benefit?
There’s a significant advantage to consolidating your business and personal tax return processes. Tax accountants can streamline the entire procedure, ensuring both returns are completed accurately and on time. This holistic approach maximises deductions across both your business and personal finances, potentially leading to a more favourable tax outcome.
Getting Organised for Tax Time Success
Tax preparation can help you streamline the process for a smooth EOFY experience. Here are some tax return tips you can follow:
- Gather Documents throughout the Year: The first step to getting organised for tax time success will be to gather all your important documents, like receipts, invoices, bank statements, and any other relevant documents throughout the year. Having everything in order saves time and through this, you can easily categorise them at the end of the year.
- Embrace Technology: Management of documents is not always an easy task, but utilising accounting software or record-keeping apps simplifies document management. These tools can help you with all expenses, generate reports and connect you directly to your tax accountant. This can simplify record-keeping throughout the year and ensure a smoother EOFY process for you.
- Consult a Tax Accountant: Tax matters can be complex or overwhelming, so it could be worth consulting a tax accountant and seeking advice. A qualified tax professional can provide expert guidance and determine the best approach for filing combined returns. They’ll ensure compliance with tax laws, help you navigate deadlines, and maximise deductions across your business and personal finances.
- Prepay Expenses: Paying for expenses that can qualify for a tax deduction before June 30 will boost your tax refund. These costs might come from work-related expenses or donations to charities. Check out the ATO guidelines to see what work-related costs you can claim.
End of Financial Year Checklist
Plan Ahead to Avoid Delays
Set specific and attainable objectives for the coming EOFY based on your business evaluation. This might include methods to lower the tax burden, such as prepaying costs or postponing income, and exploring the benefits of the Research & Development Tax Incentive. A strategic strategy will help your firm flourish.
- Bank Reconciliation: Bank accounts, debtors, asset registry, and other assets, like payroll-related income in advance, leases, and other liabilities, can be addressed in reconciliations. Make sure your bank statements and bookkeeping records match. Plan ahead to avoid delays and meet end of financial year deadlines.
- Review Assets & Asset Depreciation: Examine your asset register and make any necessary updates, including asset sales or purchases, during the financial year. Analyse and precisely record the depreciation costs for every asset.
- Review Business Expenses: Examine all of your business expenses to make sure they are justified and accompanied by the necessary records. Determine whatever tax write-offs or deductions might be available for the current fiscal year.
- Complete and Lodge Business Activity Statements (BAS): Prepare and submit your BAS, outlining all transactions related to GST for the fiscal year. Make certain that every statistic is true and backed up by the necessary records.
- Review Tax Obligations: Check for all tax obligations, including goods and services tax (GST), income tax, and fringe benefits tax (FBT). Verify that all necessary tax payments have been made over the financial year. Always make sure to verify that your business is registered for the correct taxes, and update the registration if necessary. In addition to the standard taxes, consider if your business qualifies for the research & development tax incentive. This program can significantly reduce your tax burden.
- Benefits of the Research & Development Tax Incentive: The Research & Development Tax Incentive (R&D tax incentive) helps businesses innovate and grow, offsetting some of the costs of eligible research & development (R&D). This helps businesses with financial support, boosts innovation, increases investment, and also acts as a powerful driver of innovation and economic growth by encouraging businesses to invest in the future. Unlock maximum R&D Tax benefits for your innovation journey. FundFindrs specialises in securing the largest allowable incentive for your projects Let’s discuss how we can empower your business. Schedule an appointment with us today.
- Fringe Benefits Tax (FBT): The Fringe Benefits Tax year came to an end on March 31. Now is the perfect time to start planning for the next FBT period to avoid any last-minute delays or complications. FBT is a tax paid by employers on certain benefits provided to their employees, their employees’ families, or other associates. Benefits of FBT include salary packaging arrangements for cars, meals, or accommodation, discounts on goods or services, loans with interest rates lower than market value, reimbursement for private expenses, etc.
- PAYE Payment: Detailed reporting is essential to comply with tax regulations and avoid penalties. You must give each of your employees a payment summary showing how much you paid them for the financial year and how much you withheld from these payments. Payment summaries to the ATO can be finalised through Single Touch Payroll, simplifying the process.
Maximise Tax Deductions and Minimise Liabilities with Strategic Planning
- Explore Incentives and Grants: Stay informed about any government incentives and grants, including tax benefits and incentives for businesses provided by the Australian government. Research relevant programs for your industry to minimise your tax burden. For a more comprehensive overview, read our Grants Guide 2024.
- Minimise Tax Liabilities: Plan ahead for tax-effective business decisions throughout the year for better results. If you want to change your tax rate, then consider prepaying expenses or delaying income to influence your tax bracket.
- Write Off Bad Debts: You can deduct bad debts from your taxes if you don’t think you’ll be able to pay them back. You need to have proof of your claim and have made a sincere effort to collect the debt to be eligible for a bad debt deduction. Reducing your taxable income can be achieved by writing off bad debts before the end of the financial year. This can be helpful when filing your tax return lodgement. Speak to your accountant to see if this is an option for you.
Record-Keeping Compliance and Superannuation Liabilities:
- Manage Superannuation Obligations: Tax time can be a good opportunity to review your superannuation requirements for the new financial year. As a business, paying superannuation guarantee (SG) payments to qualified employees is your legal obligation. Ensure timely payments and maintain accurate records to avoid penalties from the ATO. For every qualified employee, you have to pay at least 11.5% of their ordinary time earnings (OTE) as the SG rate. Stay updated on the SG rate, as the rate changes every financial year. Additionally, consider consulting with a financial advisor to optimise your superannuation strategy, ensuring compliance and maximising benefits for both your business and your employees.
- Maintaining Accurate Payroll Records: Keeping correct and accurate payroll records comes next on the EOFY checklist. Employers are required to utilise Single Touch Payroll (STP) to automatically transmit payroll tax information to the ATO for reporting purposes.
- Taxable Payments Annual Report: The Taxable Payments Annual Report (TPAR) is a key ATO reporting requirement for many businesses that make payments to contractors or subcontractors. The industries that must file a TPAR through the Taxable Payments Reporting System (TPRS) have been added to the government’s list. Currently, that list includes Building and construction, Government grant providers, IT services, Security services, etc.
Reviewing Your Business Structure and Employee Benefits:
- Analyse Your Business Structure: To determine if your business structure (sole trader, partnership, or company) is still the best option for you, take into account many considerations, such as liability protection, expansion objectives, and tax consequences. Seeking advice from an expert in taxes about how to organise your company to minimise taxes might be advantageous.
- Offer Tax-Deductible Employee Benefits: By providing the salary packaging, health insurance contributions, or travel allowances – as long as they abide by ATO regulations—you may attract and retain talent while lowering your tax burden.
Common EOFY Tax Mistakes to Avoid:
- Missing Deadlines: Tax deadlines are very important. Late lodgement of a tax return can lead to penalties. Plan and act well in advance to avoid unnecessary fees. Some Important deadlines to remember are income tax returns, Superannuation guarantee lodgement and payments, Capital gains tax installments, etc.
- Mixing Personal and Business Expenses: Company owners, particularly sole traders and independent contractors, frequently make the mistake of blurring the lines between their personal and corporate funds. Using business cash for personal purposes, or vice versa, complicates your taxes and may raise red flags with the ATO.
- Ignoring Superannuation Guarantee Contributions: Meeting the deadline is very important if you want to avoid the penalties. By the deadline, superannuation guarantee contributions must be exact and in the accounts of the employees.
- Not Keeping Accounts Up-to-date: It may be more difficult than required to conclude the financial year if accounting is not kept up to date. It can take time to go through all of the accounts in backlog, and doing so may make the supporting documentation for your financial statements less consistent and clear.
Transform your EOFY
By adopting a proactive approach, maintaining organised records, and seeking expert guidance when needed, you can transform the EOFY from a source of stress into an opportunity for financial optimisation. FundFindrs can assist you in maximising your business’s financial potential, from securing grants to optimising your R&D Tax Incentive application. Remember, when it comes to taxes, it’s always wise to consult with your accountant for tailored advice to ensure compliance and maximise savings.
