- Posted by Chaker Khabbaz
- On 25/05/2021
The end of the financial year is fast approaching, which means finance managers all over Australia have got their work cut out for them. They need to sort out their books, assemble tax returns, and prepare a plan for the years ahead. If you’re a finance manager who’s feeling overwhelmed by all these tasks, here’s a helpful guide to walk you through your end of financial year obligations.
Get records in order
Keeping accurate and well-organised records in accounting platforms like Xero, QuickBooks, and MYOB Online will make your end of financial year obligations less stressful. For one, having your financial records fully straightened out will allow you to efficiently reconcile accounts and submit tax returns to the Australian Taxation Office (ATO). Secondly, you’ll be able to quickly resolve any tax disputes or issues regarding deduction claims raised by the ATO. The most important documents you need to update and have lined up by the end of the financial year include:
- Profit and loss statements
- Stock and asset records, including their values
- Regular reconciliation of sales for both cash and electronic transactions
- Summaries of debtor and creditor transactions
- Purchase receipts and logbooks of work expenses stored up to five years
- Records on the business portion of an expense in case an asset is used for both business and private purposes
- Expenditure on asset improvements and repairs to calculate how an asset’s value depreciated over time
- Business activity statements (BAS) of goods and services tax (GST) collected on sales and GST paid on purchases
Account for tax changes and due dates
One of the core responsibilities of finance managers is to ensure the business meets its tax obligations by the end of the financial year. The challenge, however, is that the ATO often announces new tax laws and concessions for various businesses. Staying on top of these changes is therefore crucial in avoiding hefty tax penalties and reducing how much tax you owe.
Finance managers for trade service businesses, in particular, must know the specific conditions of tax deduction incentives like the instant asset write-off and temporary full expensing schemes. Knowing these will help you identify the types of deductions you can claim, potentially saving you thousands of dollars. You’ll also need to be diligent with submitting reports and tax records by specific deadlines. Here’s what you need to do for some of the critical upcoming tax dates:
- 21st of every month: Lodge and pay BAS. This applies to businesses with an annual GST turnover of more than $20 million.
- 25 June: Lodge fringe benefits tax return.
- 30 June: Reconcile your accounts for the end of the 2020-21 financial year.
- 28 July: Lodge and pay BAS for Q4 (April to June) of the 2020-21 financial year. This applies to organisations with an annual GST turnover of less than $20 million.
- 31 October: Submit tax returns if you run a self-employed/sole trader business.
- 28 February: Lodge tax returns for your company. Keep in mind that lodgement dates may vary.
Understand what to claim as a deduction
When preparing your company’s tax returns, knowing all the expenses you’re allowed to claim deductions on will help you save money. For trade businesses, you can generally make a tax deduction claim under the instant asset write-off and temporary full expensing schemes on the following expenses:
- Commercial vehicles (e.g., vans and utes)
- Vehicle expenses (e.g., fuel, oil, car loans, and servicing fees)
- Machinery, equipment, and tools
- Computers and tablets (as long as they’re used for work)
- Protective clothing and equipment
Manage superannuation contributions early
Every quarter, your business is legally required to pay at least 9.5% of your employees’ earnings as contributions to their superannuation fund or retirement savings account. Payment for super contributions are due on the following dates:
- 28 October: Quarter 1 (July to September)
- 28 February: Quarter 2 (October to December)
- 28 April: Quarter 3 (January to March)
- 28 July: Quarter 4 (April to June)
Companies that promptly pay for super contributions are entitled to tax deductions, provided they meet certain annual turnover thresholds. However, super contributions are only deductible for the specific financial year in which they were submitted. This means if you approve super payments on 28 July, your company won’t be able to get the tax deduction for the 2020-21 financial year. To maximise the deductions available, you must ensure contributions are paid and received by the super fund before 30 June.
As for the super contribution process, SuperStream will allow you to send payments and manage fund information electronically. You’ll also have to keep records to prove superannuation compliance, specifically details on the amount paid, date of payment, and the retirement plans offered to employees
Review the company’s finances
The best way to set your business up for success is to perform a thorough end of financial year review. Look at your company’s financial goals and evaluate how close you came to achieving them. Profit margins, return on investments, and cost per work order are great indicators for measuring your company’s growth and financial stability. If you find that any of these are not in line with your company’s goals, this will help you make course corrections on spending and revenue streams for the coming year.
Forecasting your cash flow by analysing historical financial data will even allow you to anticipate potential shortfalls and schedule your spending more strategically. For example, if you know your company goes through cash deficits during certain seasons, you’ll know when to slow down your capital investments and hiring. By understanding the patterns throughout your financial year, your business can avoid costly mistakes and continue growing.
Preparing your trade business for the end of the financial year is much easier when you have platforms that work cohesively together. Fortunately, WorkBuddy job management systems seamlessly work with your favourite accounting software, helping you improve record-keeping and various other business processes. Request a demo today to learn more.