Doing the taxes for your small business or speaking to your accountant may not give a rush of pleasure at all, but it surely can save you for a lot of pressure in the future.
However, by being tax-smart, you can get through the end of financial year stress-free. With the right preparation, you can minimize your tax bill, maximize the benefits from the tax office, and put yourself in a better position for the next financial year.
Be the best small business owner you can be! Now, let’s make every day count by using the following strategies:
1. Keep Every Record In Order
If you find yourself confused with piles of paperwork, it is time to find better ways to keep your records. Thanks to the advancement of technology, you can now electronically store receipts by scanning them, or better yet, use an accounting software to make life much easier. All you need are just a few clicks to send the information across to your accountant for your end of financial year tax. Organizing your receipts can be tiresome, but doing it now can save you time later on. You must keep in mind that as a small business owner, it is your obligation to keep records for 5 years in either electronic or paper form. These include:
• Sales records
• Purchase/expense records
• Employee records
• End of your tax records
2. Prepare Every Paper You Need
Now that you are already keeping your records in an organized manner, you also need to review and prepare the needed documents for EOFY. The following must now be added to your checklists:
• Payment summaries
• Financial documents or records
• Tax file number
• EFT details
3. Find Out What Tax Deductions You Can Claim
In preparation for EOFY tax, it is important that you keep in mind that you’re entitled to claim deductions for some expenses that are directly related to earning your income. These deductions must only be work-related, and deductions that are private or domestic are not included. You must claim the deduction in the same income year that you made the purchase. You also need to substantiate your claims with written evidence.
To maximize your tax refund each year, you can review the list of tax deductions you can claim in your specific industry. You must consider the following expenses if they are work-related and claimable of tax deduction:
• Vehicle and travel expenses
• Clothing, laundry and dry-cleaning expenses
• Gifts and donations
• Home office expenses
• Interest, dividend and other investment income deductions
• Self-education expenses
• Tools, equipments and other assets
You may be able to claim other deductions that were not mentioned above. As a rule of thumb, if you need to spend money to earn income, you can usually claim it—either as an immediate deduction, or over time.
4. Accomplish Everything On Time
Don’t wait until the 30th of June to get your records up to date. It must be one of your habits to reconcile your bank account at least once a week to avoid cramming when EOFY comes. Always keep in touch with your current financial information to be able to make sound financial decisions.
This 2015, the 30th of June falls on a Tuesday, so it is ideal to have all your administrative work done by the 26th of June. You must also take note that banking systems require up to three working days for fund transfer, so financial transactions must all be done by the 24th of June. For superannuation to be deductible, it has to reach the hands of the super fund trustee by the 30th of June. The difference between paying an expense on June 30th or July 1st is an extra twelve-month wait to get the benefit of the deduction!
Moreover, it is expected that tax regulations may change all the time, that’s why it is important be aware of any recent changes that has occurred, and if it will affect your business. If any changes took place, talks to your accountant about it and make any needed adjustments now.
5. Consult Your Accountant
The sooner you settled things with your accountant, the better. Your accountant can give you more strategies that are worth pursuing to best suit your circumstances. Ask your accountant to have a look at records to give you an idea of what your tax liability will be. Accountants assess your circumstances, goals and timeframe – and how you feel about risk – and provide specific advice to your situation, setting you up for an even more prosperous year to come.
6. Know How To Reduce Your Tax Liability
Here are the following ways you can help to reduce tax payable. Take note that your accountant must be first consulted before proceeding with any of these tips:
• Remit super contributions before June 30.
• Prepay some expenses like rent, loan, interest, business insurance, motor vehicle insurance, memberships and subscriptions before the 30ths of June.
• Contribute to your super fund.
• Purchase office items that you need before the 30th of June.
• Make charitable donations.
• Review your accounts receivable and writ off any unrecoverable bad debts.
• Review inventory and write off any lost, damaged, or unsellable items.
7. Get An Early Start To The Next Financial Year
The end of the financial year is an ideal time to reflect about what your company has been through, and to think about the year ahead. According to Louise Biti, director of advisory firm Strategy Steps, “The 30 June deadline is not just about preparing for this year’s tax return. It is also a good time to reflect and to get ready for the coming year so that investors can gain the full advantage of the year ahead.” Biti also says that this is the time to compare the cost of life insurance, review financial goals and saving plans and set a budget.
It is a good idea to use the end of financial year period to sit down with your accountant, review your budget and see what you can improve on or change for the next year. Planning early could get your business in an even better financial position for 2016.
Yes, the EOFY tax could be really stressful, but not anymore with the help of right information and trusted bookkeepers and accountants. You only need a few weeks to do the mentioned tasks above, and after that, you will no longer find yourself drowning in piles of confusing paperwork. At the end of days of hard work, you can sit peacefully and admire your company for what it already has attained, and for all of its sweet potential.