Financial management

How to make EOFY a less taxing time for your small business

- May 29, 2023 4 MIN READ
EOFY end of financial year blocks

The end of the financial year and all of its obligations can be a taxing time for small business owners, writes Suzanne Mitchell, Australia Market Lead for GoDaddy.

From reconciling records to examining expenses, the financial year end is time consuming, especially if you aren’t as organised or your business is not as automated as you would like it to be.

So, what are some top tips to help make tax time smoother for small businesses?

1. Mark your calendar

June 30 2023 might officially mark the end of the financial year, but there are a number of other key calendar dates small business owners need to know to get their tax affairs in order.

Your business tax return must be filed by 31 October 2023, or you may have until 15 May 2024 if you work with a registered tax agent and have booked your appointment by 31 October 2023 with a tax agent.

Make sure you know when your GST and Business Activity Statement reporting cycles fall due, and also ensure you check the quarterly superannuation payment due dates to avoid incurring the super guarantee charge.

Make sure you note the following in your calendars: The 2023 Fringe Benefits Tax year ended on 31 March 2023. You’ll need to lodge your FBT return and pay any outstanding liability by 22 May 2023 to avoid interest and penalties. This date applies as the statutory due date of 21 May 2023 falls on a weekend this year.

2. Get clarity on your claims

Small businesses can claim both running costs and capital expenses as deductions on their income tax returns, as long as they are related to their business activities.

“Most businesses need to spend money to make money and these expenses can be claimed as tax deductions,’’ Scott Bailey, Senior Director and Head of Tax Accounting at ITP Accounting Professionals, says.

Running costs are those day-to-day expenses essential for the operation of a business and include rent and utilities, insurance, staffing costs, marketing, travel, and training and education.

Capital costs relate to the purchase price of a depreciating asset or any expenses related to its transportation and installation, as well as replacements or enhancements to your business.

Depreciating assets are items like machinery, computers, cars and phones that have a limited life expectancy and decline in value over their useful life.

Company tax return form

3. Consider pre-paying some expenses now

ITP Accounting Professionals say one of the little-known strategies to reduce a business tax obligation is pre-paying some expenses.

“By making payments for expenses such as rent, insurance, website domain registration or subscriptions before the end of the financial year, small business owners can claim these expenses as deductions in the current year’s tax return,” Bailey says.

Remember to consider your business’ cash flow and circumstances before prepaying expenses and claim only those that are genuinely needed for the business.

4. Check your eligibility for tax incentives

There are still a number of tax incentives in place that were introduced to support business during the COVID-19 pandemic.

Temporary full expensing is available for eligible small and medium-sized businesses to immediately deduct the business portion of the cost of eligible new depreciating assets.

The incentive covers the period from 6 October 2020 until 30 June 2023, and assets that were first held and used or installed ready for use for a taxable purpose.

The Small Business Income Tax Offset is another incentive that offers tax offsets of up to $1,000 per year for eligible unincorporated small businesses.

The Australian Tax Office (ATO) will determine the value of the offset your business is entitled to based on your business income.

5. Plan for next year now

One of the simplest ways to make tax time less stressful is to get more organised with a system to save all of your financial records.

A spreadsheet, mobile app or specialised software can help you track all of your income and expenses and keep transaction details in one place.

“We find that many tax deductions are left unclaimed because of missing paperwork, so it’s really important to keep good records when it comes to maximising your tax return,’’ Bailey says.

Remember also that the ATO also requires individuals and small business owners to keep records to support their tax claims.

If you have employees, look out for software that is Single Touch Payroll compliant as it will report your employee’s payroll information straight through to the ATO.

With these simple strategies, tax time can become a less time-consuming and daunting affair for your small business.

Note: Remember the advice above is general, and it is advisable to consult a registered tax professional regarding your specific tax situation.

This article was first published on Kochie’s Business Builders, read the original here.

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