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The end of financial year is fast approaching and that means getting all your paperwork ready so that the annual meeting with your accountant is based on real figures for once so that you actually capitalise on any tax mitigation strategies they may suggest....
It's so important that you get your ducks in a row BEFORE you go to see your accountant and BEFORE the end of the financial year so you have time to act on their recommendations. It's no good after the 1st of July and it's no good if the information you provide to them is not accurate and up to date. So here is a short summary of the things you should have sorted BEFORE you do your year end review.
- Ensure last year is finalised
- Last year tax return needs to be lodged and you should have a copy
- Check that all accountants adjustments from last year processed in your file
- Make any adjustments in the data file for any FBT year end adjustments
- Review the list of Assets & remove obsolete or defunct items
- Plan for a stock take if you haven't already done one
- Write off any old unrecoverable debts
- Check your payroll is in order
- Ensure all of your BAS are lodged
- Gather together all documents (invoices and finance agreements) for any capital purchases
Before End of Year - Review Business Progress:
- Review Profit & Loss to end March/April - Check with your trusted advisor (accountant & bookkeeper) on how you are doing for the financial year. Mark it in your diary to do this every April/May!
- Review Superannuation paid for Directors - Under 49 years maximum contribution is $30,000 and over 49 it is $35,000. Discuss with Accountant
- Review cashflow for additional tax deductable pre-30June purchases
- Review the Integrated Balance Account (monies owed to the ATO) – can this be paid off by 30th June
- Review if changes are required to business process/procedures - so timelines can be established & work completed– eg software upgrade/change
Before End of Year - General Tax Checks:
Maximise those deductions
If the business’s cash flow is good then it may make sense to spend on extra expenses before June 30 to maximise deductions. Discuss strategies with your accountant
- Get the cars serviced and replace the tyres
- Service Equipment
- Pay the membership fees, subscriptions
- Pay the insurance bills etc
- Get a discount on rent by prepaying for a period
- Pay yourself additional wags and superannuation
Private usage adjustments
A once a year adjustment for private expenses – yes you can do this to cut down on data entry during the year.
It is absolutely acceptable to claim all GST on all taxable purchases for a business or enterprise during the year if your turnover is less than $2mil, even if a portion of the expenses are for private use.
The ATO allows a once a year adjustment to reduce the amount of GST claimed. When the Tax Agent has completed the end of year tax returns and informed a number of private expenses, you will then need to make a GST claim reduction in the next BAS. Therefore you will have only claimed back the GST on the business portion.
So if you are advised there was $1100 of private expenses, then reduce your next GST claim by $1100/11 = $100. You do not have to inform the ATO, just keep the records.
If you post the totally private expenses to the loan account and don’t claim any GST back at the time of purchase that is okay as well.
Stock / Inventory
- Review stock list in detail including when the item last sold and at what price
- Consider sale at discount of items that are slow - realise the cash
- Write off the value of stock that won’t sell
- Take a full stock count at 30 June and enter through Stock Count and Inventory
- Adjust as required
Existing Plant and Equipment
- Obtain the list of assets the accountant uses to calculate depreciation
- Review the list and remove items that no longer exist or are obsolete
- Highlight, to the accountant, any items sold
New Plant and Equipment
- Businesses are permitted to write off Plant and Equipment that cost less than $100 (incl. GST)
- Business with turnover less than $2m using Small Business Entity Concessions can write off assets under $20,000 for the financial year 2016-17
- GST reporting of Capital Acquisitions (G10) threshold is $1,000
Before End of Year - Payroll Checks
Ensure you check the maximum amounts of superannuation
If you are processing the payroll for businesses, it is wise to check that no employee receives more than the maximum superannuation contribution, unless instructed by the employee’s financial planner or accountant to do so.
Under 49 years maximum contribution is $30,000 and over 49 it is $35,000.
If employees or owners appear to be near or over the maximum the bookkeeper should notify the person in question.
Maximise those tax deductions - Superannuation
While Superannuation Guarantee is not due till the 28th of July, in order to get the income tax deduction in this financial year, the superannuation must have been paid through your bank account before 30 June.
Effective technique: use the Superannuation Clearing House
Review and discuss information with Accountant and Bookkeeper