As the end of the financial year approaches, small and medium-sized enterprises (SMEs) must prepare themselves for a range of crucial tasks to ensure a smooth transition into the new financial period. From lodging tax returns to managing debtors and creditors, these year-end responsibilities can feel overwhelming for business owners.
This article will provide you with the key steps needed for a successful financial year-end. Let’s take a look at practical tips to make tax time as efficient and stress-free as possible.
End of Financial Year tips for SMEs
Lodge Tax Returns
Most businesses are required to lodge a tax return at the end of the financial year. This involves providing a summary of your income and expenses for the year. Make sure to check the specific lodgement dates provided by ATO.
Self-employed and Sole Traders: You need to lodge an individual tax return that includes your business income and expenses. You can submit your tax return online through myTax (accessed through myGov), by paper, or through a registered tax agent.
Companies: Companies need to lodge a separate company tax return each year. Additionally, if you earn income from wages, shares, or dividends from the company, you must also lodge an individual tax return.
Review and Manage Debtors and Creditors
It’s important to regularly review your accounts receivable and trade debtors to identify clients who are delaying payment. If your payment collection efforts have been unsuccessful, consider the possibility of escalating to a debt collection service. This will allow you to focus on more profitable clients.
Review your accounts payable and trade creditors to ensure accurate accounting. Plan to settle outstanding payments by the end of the financial year.
Addressing Bad Debts before 30 June
Identify clients who have closed down or consistently failed to pay their outstanding debts. In extreme cases wherein debt collection efforts have been unsuccessful, it might be better to consider writing off bad debts. Writing off these bad debts before the end of the financial year can enable you to claim a tax deduction for the unrecoverable amounts. Document the write-off in the business’s records and reverse the sale by issuing a credit or reverse invoice.
Superannuation Contributions Timing
Ensure your Super Guarantee contributions are paid before June 30 to qualify for a tax deduction this financial year. Consider making early payments for the June quarter to maximize your tax benefits. Allow sufficient time for the contributions to reach the superannuation funds as processing times may vary.
Efficient Stock Management
Conduct a stocktake before June 30 to assess the value of your trading stock. This can be done through a physical count or by using a perpetual stock record system.
Small Business Entities may be exempt from a yearly stocktake if the stock value has not moved by more than $5,000 during the year. You may consider selling or disposing of slow-moving stock to exclude it from the count, as tax is paid based on the stock value at the financial year-end.
Tax Return Lodgement dates to remember
Remember to check the specific lodgement dates for your tax returns based on your business structure. Sole traders and partnerships typically need to lodge their taxes between 1 July and 31 October. Company tax return due dates are usually 28 February, though they can vary.
Please visit the ATO website for more detailed information on lodgement dates.
Ready to start the new financial year right?
We reccommend consulting a registered tax agent or seeking professional advice when filing tax returns. Doing so ensures compliance with the latest regulations and that you understand your rights and entitlements in lodging tax returns.
By following EOFY best practices, you can streamline your end-of-financial-year tasks and ensure a smooth transition into the new period. Remember, the end of the financial year is not just about fulfilling obligations; it’s an opportunity to assess your business’s performance, identify areas for improvement, and set goals for the year ahead.
Embrace the power of accounts receivable automation to change the way you do business for the better. Speak with one of our AR experts to discover how you can get paid faster this new financial year.