Tax time is nearly upon us. Here are eight expert tips for getting organised and making your tax return work for your business this EOFY.
At a glance
- Staying organised throughout the year is crucial, and for businesses that carry stock, an end-of-year stocktake is essential.
- Bringing forward superannuation payments for your staff is an easy way to reduce your taxable income.
- If you have invoices that won't be paid, write them off as bad debt now.
- Look at everything you're able to file as deductions and consider pre-paying next year's expenses to reduce this year's tax bill.
The end of the financial year (EOFY) is a daunting time for small business owners. Tax laws can be complex and preparing an effective tax return can feel like a headache.
But understanding the ins and outs can have a mammoth impact on your organisation’s financial health, while ensuring you remain compliant.
Many businesses feel unprepared. In fact, 35% of small businesses would like assistance with tax planning and management, while 11% of those taking out loans in the quarter to March 2024 are using them for government payments and tax.*
Effective tax preparation involves planning ahead – here’s the definitive guide to nailing your tax return.
1Get organised
Organisation is key. Documenting your transactions enables you to streamline your tax filing and prepares you for any audits.
2Do a stocktake
If your business holds stock, an end-of-year stocktake is essential. Write off any stock that’s damaged or obsolete to further reduce your taxable income.
“For slow-moving stock, consider end-of-financial year sales to free up shelf space and convert it into cash,” advises Craig Wood at Sculpt Accountants.
3Get super contributions in early
Superannuation contributions made before EOFY can reduce your taxable income and are tax-deductible. This goes for your own personal contributions and those you make for your employees.
All contributions must be received by the super fund by 30 June to allow a tax deduction this financial year, so it’s worth paying early, says Craig.
“Look to pay the contributions by 15 June to be on the safe side.”
This is a strategy Nikhil Jogia at Jogia Diamonds is on top of.
“Bringing forward the superannuation payment by a few days or weeks is one of the easiest ways to reduce a business’ tax liability, and it requires no additional cash or capital expenditure,” says Nikhil.
4Include all income
This advice is particularly relevant for sole traders who may have additional income, including wages from other sources, side hustles or income from investments.
5Write off bad debts
If you have any outstanding invoices you suspect won’t be paid, write these off as bad debts by 30 June.
This reduces your income on paper and can lower your tax obligations.
6Maximise your deductions
Every expense that goes into running your business may be deductible, including travel, equipment, marketing materials, stationery, consumables, repairs and even charity donations. And if you run your organisation from home, you can claim a portion of the expenses that relate to your business.
Just make sure you’ve made any purchases and have them ready for use by 30 June, says Craig.
Businesses with annual turnover of less than $10 million can claim a full deduction for assets costing less than $20,000, instead of having to depreciate them, he adds.
7Pre-pay your expenses
You may even consider pre-paying some of your next year’s expenses in advance to help lower this year’s tax bill.
Businesses with annual turnover under $50m can prepay up to 12 months of expenses to get a full tax deduction in this financial year.
“Most businesses like receiving cash and paying 12 months in advance may allow you room to negotiate an appropriate discount,” says Craig.
Brad Gall at Brad Gall Electrical always times expenses to manage tax deductions, but he warns that bulk-buying this financial year for things you don’t yet need may mean you’ll have fewer deductibles next year.
“This strategy is only advisable if this year was overall good or at least better than usual. Otherwise, it can easily backfire one year from now.”
8Get professional help
EOFY is the perfect time to set up a meeting with your accountant who is up to date on the latest tax laws and can advise on specific actions that may benefit your unique business needs.
“A good accountant who has experience in your industry and knows your business inside out is invaluable,” says Brad. “They’ll be able to make an informed assessment not only of this year’s performance, but also to make projections for the next.”
It may also be worth familiarising yourself with small business tax rates and where your business sits overall – and then discuss with your accountant how this may impact your tax return.
Whether you’re taking advantage of tax deductions, supplier sales or gearing up for the new financial year – we’ve got your back. The Prospa Business Line of Credit comes with an easy online application and fast approval times – apply today.
