The end of the financial year is fast approaching. What does your business need to do before the end of the year?
In reviewing your business before year-end, don’t forget to make sure your tax affairs are in order. Below are some tips that may help you identify tax savings and the actions you need to take before EOFY.
Pay for supplies before year-end
Are there any pending expenses you will need to pay come the new financial year? Ask suppliers for all invoices for supplies made up to 30 June, arrange to pay them and get a tax deduction.You can claim an outright tax deduction for depreciating assets up to a value of $6500.
You can also claim a tax deduction for prepaid expenses if the payment covers a period of 12 months or less and that period ends in the next year. Prepay expenses for services such as your accountant or tax advisor’s fees before year-end even though they will do their work for you in the next financial year. Prepay business supplies, such as materials, stationery, office supplies, etc. before year-end. All these prepaid expenses are deductible in the current financial year.
Review business assets
Review plans to purchase fixed assets and consider purchasing them before year-end – you can claim an outright tax deduction for depreciating assets up to a value of $6500.
Check in with your employees
Here are a few tips when dealing with employee costs:
- Similar to business costs, if you incur and/or pay certain employee costs before the end of the financial year, you can claim a deduction for them.
- Check and pay all superannuation obligations as you only get a deduction for all employee obligations actually paid.
- Encourage employees to take annual leave and long-service leave, or consider paying it out (if financially viable) to get a tax deduction for leave expenses.
- Accurately calculate employee bonuses and notify employees of their bonus for the year – you can deduct an employee bonus where you have a definite commitment or legal obligation to pay the bonus.
Clean up your accounts
If you’ve encountered problem customers who haven’t paid you, you’ve exhausted all avenues and it looks like you’re not going to be able to recover the debts, write them off before EOFY. A tax deduction is only available when the debt is written off as a bad debt.
The same rule applies for any stock you’re not going to be able to sell. Write off the value of any obsolete stock so that you can claim a tax deduction for the write-off.
There may be a lot going on for the business as the financial year comes to a close, but don’t forget to spend some time focusing on your tax deductions to ensure you receive all the savings your business is entitled to.
Disclaimer: The views expressed, and any advice given, in the above article are those of the author, and do not necessarily reflect the views of RaboDirect. We recommend that you seek professional advice before making any decisions relating to the matters discussed in the article.