The end of the financial year can be overwhelming for businesses, with numerous considerations that can leave you unsure of where to start. To ease the process, we have compiled a useful guide encompassing various aspects you should prioritise. Beyond fulfilling essential requirements, the end of the financial year presents an ideal occasion to realign your business objectives and embark on a fresh start.
- Write off any bad debts
Bad debts are tax deductible when written off and can be used to offset your taxable income. So, if you’re still chasing invoices from the last financial year, now’s the time to write them off. In the future (if you use Xero), you may wish to utilise the automatic invoice reminder feature.
- Expense Advancing
Tax deductions aren’t just for services or items you buy within the financial year. You can also claim deductions for certain prepaid expenses (as long as you’re not paying them more than 12 months in advance or after the end of the next financial year). This is a good strategy if you don’t think next year will be as profitable as last year was.
- Meet your super obligations before 30 June 2023.
Got a business with superannuation guarantee obligations? Meeting your obligations before 30 June will allow you to claim a tax deduction in your income tax return this year, rather than waiting until the following year. Employee super contributions aren’t tax deductible until they’ve been paid and received by the fund, so ensuring all contributions are completed by the end of the financial year is a great way to reduce your income tax bill. If you utilise the Xero Auto Super feature, the cut off date to guarantee your contributions are received in time is 14th June.
- Temporary full expensing
Up until 30 June 2023, small businesses can fully expense (i.e. write off) assets purchased at an unlimited value. These assets must be fitted and installed prior to the EOFY in which you are claiming for. The items in question can be new or second-hand, and vehicles are included, but you must use them for business purposes. Note: Motor vehicles still have a limit of $60,733. And remember, from 1 July 2023 this asset amount reduces to a $20,000 limit – so take advantage while you can!
- Set Next Year’s Budget
Whether your budget has already been set or not, now is an excellent opportunity to assemble or revisit it. If you utilize Xero as your accounting software, take advantage of the Budget Manager tool to streamline the process. If your budget is already in place, carefully examine any variances compared to last year's budget and make necessary adjustments to ensure alignment with your business goals and objectives.
- Policy Check
Do a policy check on matters such as HR and employment policies, data privacy and security policies, IT and technology policies and compliance policies. Regular policy checks in these areas can help small businesses identify gaps, update outdated policies, and ensure that they operate in a legally compliant and ethical manner.
- Inventory and Products
If you hold stock, it’s that time of year to complete your stock take! We require your Stock on Hand value as at 30 June 2023 in order to prepare your Financials and Taxes. And if you have any obsolete, slow-moving, or damaged stock, you can write it off to save on tax.
- Get digital and paperwork in order
Now is the time to make sure your online accounting software is reconciled up to date and that you have receipts for any expenses or asset purchases filed away – either physically or electronically. Any small business will need to keep their receipts for five years starting from the date they lodged their tax return.
- Pay bonuses
Consider rewarding your hardworking staff by paying bonuses at the end of the financial year recognising their contributions and boosting morale while also potentially maximising tax benefits for your business. Ensure that bonuses are recorded in your payroll software and filed with Single Touch Payroll.
If you have any questions about any of the items listed above or you require further information please contact our office and our team will be more than happy to assist you.