EOFY or the end of the financial year is the time when small businesses in Australia need to deal with their taxes. However, in 2020, this period posed numerous challenges thanks to the COVID-19 pandemic, and things look to be going on a similar course in 2021.
In this post, we’re going to take you through some handy tips that will help your Australian small business deal with the accounting and taxation challenges that lie ahead. So, without further ado, let’s get right into it!
- Secure your IT systems and data
The COVID-19 pandemic hasn’t only resulted in problems in healthcare and the economy – it’s also been the perfect breeding ground for a wide variety of cybersecurity attacks and email scams. Simply put, if you haven’t put measures in place to protect the data of your company, its customers, and its stakeholders, you should get to it without any further delays.
We recommend updating your software and using strong passwords for giving your system the protection it needs. You can also consider multi-factor authentication, which involves setting a combination of security checks. This ensures the prevention of unauthorized access to your business’ computer systems, online services, and applications. We recommend using MYOB or XERO, which are both online financial accounting software with a slew of helpful features.
- Take the help of the Australian Tax Office (ATO)
The Australian Tax Office (ATO) has made things simpler for SMEs in light of the pandemic. For example, if you and/or your employees are working from home, you can claim 80 cents/hour to cover all your running expenses. This eliminates the need for going through complex calculations.
Both small businesses and employers can access helpful information that has been provided by the ATO. Some of the aspects that the ATO has focused on include:
- Keeping track of employee JobKeeper payments
- Instant asset write-off
- Cash flow boosting
The ATO has also provided a list of legitimate deductions for businessmen working from home, which includes:
- Costs associated with cleaning your work area at home
- Bills associated with cooling, heating, and lighting
- Depreciation of computers and other office equipment
- Depreciation of furniture and fittings that are part of your home office
- Computer, furniture, and other small capital items that cost below $300 don’t need to be depreciated, i.e. they can be immediately written off in full
- Costs associated with the repairs of furniture, furnishings, and equipment of your home office
- Expenses associated with internet and telecom services
- Prioritize mental health
Most Australian small businesses failed to meet their financial goals in 2020. Not much is going to be different in 2021, given that COVID-19 is still very much on the rampage around the world. In such a scenario, it’s important that you prioritize your mental health and don’t push yourself too hard to achieve the goals that you outlined in the budget 2021 for your business.
Apart from taking care of your own mental health, you should also encourage open and supportive communication among your employees, even if you are all working remotely. The Australian Government has put out some practical ways in which owners and employees of small businesses can access support for mental health issues.
According to the Government’s recommendations, mental health risks can be managed by identifying hazards, assessing and controlling risks, and continually reviewing control measures for ensuring effectiveness. You should also keep your stress levels in check and ask your employees to do the same by:
- Maintaining a healthy balance between professional and personal life
- Exercising regularly for improving stamina and boosting your energy levels
- Getting enough sleep and eating healthy food
- Not over-committing yourself
- Planning events well in advance to be prepared
- Relaxing through activities such as listening to music, meditation, and/or practicing breathing techniques
- Keep your financial statements updated and reassess them
Simply put, today’s market is unprecedented, and this should be reflected in your forecasts and budgets. Take your financial advisor’s help and keep your financial statements updated, and don’t forget to reassess them periodically to keep track of accounts receivables.
Go into great detail regarding what the effects of the market are on your workforce and your business operations. If you feel you lack the intuition and foresight to predict the changes in this uncertain market, take the help of the COVID-19 Contingency Plan produced by CPA Australia. This plan is sure to give you a much clearer picture regarding the future of your small business in an uncertain market landscape.
- Count on your advisors
Financial advisors are more important than ever before, and you should seek counsel from them to steer your business through this uncertain period. EOFY processes can be daunting, and if you want to tackle them yourself, it can impact your business’ productivity negatively.
That’s why if you don’t have a dedicated financial advisor for your business, it’s time you choose one. Thankfully, there are many experts out there who can help you out. While you will have to shell out more money to hire the services of a reputed financial advisor, you should consider it money that will be well spent in the long run.
Additional tips for EOFY for small businesses
- Prepare the profit and loss statement that outlines your business expenses and income. For tax purposes, it’s best to consider JobKeeper payments as income.
- Keeping records of depreciating assets is vital. You should have records of these assets for as long as you have them and for an additional five years following their disposal. Fast-tracking depreciation is also an option for some SMEs now. Find out from your financial advisor if your small business is eligible for it.
- If your business is a buyer and seller of products, you should undertake a stock take. Your records should consist of every stock on hand along with their respective values. Other records necessary include when and how the stocktake was done and by whom along with the basis of the stock valuation.
- You should have a summary of your creditors and debtors prepared. During the preparation of this summary, you should take debt repayment plans and/or creditors’ agreements into account. This is especially important if your business has been through a restructuring and is currently implementing a post-COVID recovery plan.
- You should have digital records and/or scans of all business-related documents that are paper-based. Make sure that all the digital records have backups as well.
- Ensure that you meet all superannuation obligations that concern payments made to super accounts of employees.
- You should finalize GST reporting, fringe benefits tax records, and Single Touch Payroll income statements.
So, now that we’ve taken you through the handiest tips for getting your SME prepared for EOFY, we hope that your business will be ready by the time June 30 comes around. To conclude this post, we’d like to wish your business and its entire workforce all the very best for the future.