With just two weeks left until the end of the financial year, it’s not too late to get your business’ EOFY and tax requirements sorted – but you’d better get your skates on, writes Xero partner and accountant Lawrence Lu, founder and director at WL Advisory Chartered Accountants.
If there’s one day in the calendar that most of us accountants and bookkeepers plan our year around, it’s – you guessed it – 30 June. And today marks just over two weeks until the FY22 deadline.
Understandably, small business owners (perhaps yourself included) don’t always share the same enthusiasm for end of financial year (EOFY). In fact, Xero’s new survey reveals that almost half of you would rather be stuck in traffic than tackle the tasks and responsibilities associated with tax time. But take my word for it; putting off your to-do list won’t make it disappear.
Five top tips to get your business’ EOFY sorted
If you’re struggling to get started, below is a list of handy tips – take what you need and work with your advisor to nail EOFY.
1. Don’t fly blind when it comes to tax
According to Xero’s survey, seven out of ten small business owners are expecting a tax refund or a tax bill this EOFY. How can you know for sure? By tax planning. Together with your advisor, this will help you estimate the amount of tax payable or refundable for the financial year, and work out whether to defer, minimise or front your fee based on your cash position.
If you receive a tax refund, it might be wise to consider using it to upskill your employees. Why? Because earlier this year, new tax deductions were proposed for small businesses, including the Technology Investment Boost and the Skills and Training Boost. When these bills pass as legislation, this means that for every $100 spent on training, you could receive $120 in tax deductions.
Amidst the ‘great re-evaluation’, finding (and keeping) team members is a real challenge, so investing in employee development could save you expensive recruitment fees in the long term.
2. Take advantage of instant asset write-offs (but get your skates on)
For small business owners looking to purchase or upgrade new equipment, you’ll likely be aware of the instant asset write-off scheme (known as temporary full expensing to us accountants). This allows you to claim the full cost of an asset you’ll use to run your business (within a certain threshold), such as a car or piece of machinery.
The catch? You must make the purchase and – most importantly – have it installed, in use or registered by EOFY (30 June 2022) in order to claim your cash back this financial year.
But before you reach for your wallet, I’d encourage you to consider a couple of points. Firstly, will the asset you’re planning to buy be used solely for your business? If not, you may have to assess whether it’s worth investing in (and if you can afford it), as you won’t be able to claim all your money back.
Secondly, it’s important not to over-stretch yourself financially just to claim a tax deduction. So, sit down with your advisor to work out how your potential purchase could impact your cash flow to determine if now is the right time to invest.
3. Leverage tech to work smarter, not harder
Almost half (49 per cent) of small business owners surveyed by Xero claim to keep meticulous expense and receipt records all year round. And with the right technology, this doesn’t have to be a chore.
Whenever we onboard new clients, I recommend they implement cloud-based accounting software to boost efficiency and save time on admin tasks like record keeping and reporting. As an advisor, it also means we can collaborate through our connected systems; we don’t have to request information in order to get an up-to-date view of their business position, which saves so much time in the long run.
4. Set yourself some goals for FY23
Too often, I see clients get caught up in the day-to-day of running a small business. This often means they forget to pause and reflect on why they do what they do. As an example, I had a client whose business was thriving financially – for years, he’d put in the hard yards and taken all the risks. But his efforts weren’t reflected in his salary (or his retirement fund). One day, I asked if he felt like he was reaping the benefits of being his own boss. His answer? No.
Tax time is a great opportunity to set some goals around not only your business’ finances but your personal wealth too. Better yet, take it a step further and consider targets beyond the numbers. Maybe you want to spend more time with family or focus on your health. Whatever it is, make this EOFY a decision-making checkpoint.
5. Lean in and learn from your advisor’s expertise
It’s a common misconception that an advisor’s expertise is limited to numbers. In reality, most advisory nowadays extends well beyond the books. Part of our job is to understand and recommend solutions to small business pain points, from time-consuming admin processes to staff shortages. So make sure you’re getting the most out of your accountant or bookkeeper’s expertise by exploring their expanded service offerings.
No matter where you’re at with your EOFY tasks and responsibilities, there’s still time to get organised. With a bit of planning and the right guidance, FY23 could just be your best year yet.
Whether you’re a tax time pro or a first-timer, Xero’s EOFY small business resource hub has all the info you need to set yourself up for success. Head to this page to learn more.
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