The end of the financial year (EOFY) is a good opportunity to reflect on your business, avoid any tax pitfalls and improve your financial position. Make the most of EOFY with these top tax tips.
To make use of all the deductions at your disposal, bring forward expenses such as repairs and maintenance so they are incurred before 30 June. Also consider prepaying monthly recurring costs like rent, electricity, wages and utilities to bring forward deductions into the current financial year.
Small businesses can also immediately deduct the cost of the purchase of business assets under $20,000. Previously, they had to be depreciated over a number of years and could not be claimed outright. So whether it’s updated computer software, electrical goods or new tools, now is the time to jump on those big-ticket items.
Claim Bad Debts
EOFY is prime time to write off any bad debts your business has not been able to recoup this financial year. To minimise your company’s tax bill, detail what the bad debts are and the efforts you have made to recover them.
Make sure the debt was previously included in the company’s assessable income, otherwise it will not be eligible to be written off.
Employee Super Payments
Ensure you have made sufficient quarterly superannuation contributions for your employees (currently 9.5% of salaries). Eligible superannuation contributions for the June quarter must be paid by 30 June to be tax deductible in that financial year.
Also make sure you are aware of the federal government’s SuperStream program, which requires superannuation contributions to be made electronically in a standard dataset.
Capital Gains Tax
If your small business made any capital gains in the current financial year, consider ways you could minimise tax on those gains. This could include selling assets that have incurred a capital loss to offset those that have made gains.
Get Rid of Old Stock
Ensure you write off any old, damaged or obsolete stock by 30 June, as the value of the write-off provides an immediate tax deduction. For any stock that is now worth less than cost price, look at valuing it at a lower market value to reduce your tax bill.
By taking these steps to ensure your books are in order, you can rest assured your business will avoid any nasty surprises at tax time, while also improving your company’s finances.
Read five must-dos for small business business owners for EOFY to help you get on track.