For business owners and taxpayers, the approaching end of financial year (EOFY) is a critical opportunity to review and reset, writes Jane Betschel, Head of SME Direct, MYOB
After a tumultuous start to 2020, this year it will be especially important to make the most of your time with your accountant, and to prepare and lodge your return early. Maybe you’re planning to reinvest your tax return into the business, or maybe your employees need your support to lodge their returns on time. Whatever the case, it pays to be prepared and to get the job done right.
Here’s what to cover with your accountant so you can make the most of your time together and get a head start on planning for next year.
- COVID-19, JobKeeper and the ATO: What’s new this year?
This largely depends on the situation of your business. For a lucky few it will be business as usual, but if like many Australians you’ve been affected by bushfires, COVID-19 or the general slowing down of the economy, there may be some grey areas around tax and compliance this year.
You may have received JobKeeper payments; salary sacrificed to ensure your team could stay on; or shifted operations from physical to digital. Each of these changes will have repercussions come tax time.
First, you must clearly understand your tax obligations. If you have received some form of government stimulus this financial year, you’ll need to be across the reporting requirements. Set aside time to discuss the details with your accountant to ensure you’re fulfilling your obligations to both the ATO and your employees.
Once your obligations are clear, your accountant can also assist you in maximising your return by ensuring you make the most of any eligible claims.
- What do I need to know about working from home and other deductions?
Before you meet with a professional, think carefully about what business activities have changed since the past reporting year.
Common claims to discuss this year will include any major changes to the way you work. This includes working from home as a result of physical distancing laws. Talk to your accountant or bookkeeper about claiming on your home office set up, including equipment, energy bills or insurance.
For retail and hospitality, there may have been a shift in transportation to collect supplies or make deliveries to customers. Your accountant or bookkeeper will be able to assist with requirements for logging and claiming kilometres.
Asking a professional about what you’re eligible to claim, what evidence you need to provide and what grey areas you should look out for will allow you to maximise any claims.
- How can I economise if I’m expecting lower income and a lower tax return?
If you’re expecting lower income and tax returns this year, you’ll need to reconsider your forecasting and planned spending. It’s critical to adjust future planning so you’re not spending money you don’t have.
A trusted financial adviser is the best person to assist you, as their position outside the business allows them to see beyond the detail of the day-to-day. They’ll be able to review your cash flow, identify areas of exposure and opportunity and review your internal workings to ensure planning and cashflow align.
Keeping your books up to date is essential to enable an accurate view of your financial position at any given time. With online software, you can automatically keep bank feeds up to date, keep track of your expenses and know that it’s all there for your financial adviser to review.
Professional advisers can also identify areas for savings, such as how to cut down on discretionary spending, look for more efficient utilities or how to downsize your physical footprint. You may also see cost savings in areas such as car parking, paying staff kilometre allowances, and other ways to reduce traditional “office” costs if staff continue to work flexibly and from home.
Enlisting professional help can really help manage not only the financial burden, but also the administrative and emotional burden that comes with running your own business.
Set yourself up for success.
Running a business can be lonely. Family and friends can help to ease the mental load, but when it comes to providing useful business advice, community groups like Sydney Startups or Startup Victoria are great for connecting you to peers with shared experiences and business-relevant advice. For tax specific information, the ATO and industry associations like Chartered Accountants Australia and New Zealand, CPA Australia, or the Institute of Public Accountants are excellent resources. The Pulse, which has over 170,000 active members, also provides a range of small business and accounting advice, with topics from the JobKeeper Subsidy to ‘Small Business Tax Planning Strategies for 2020’.
The end of the financial year is the perfect time to set your business up for success in the following year. It’s like setting your new year’s resolutions for your business. When you close out one financial year with a tax return, and once all obligations are met, you can use the clean slate to set yourself up with good systems and processes. Ultimately, with the right planning and processes, you shouldn’t have a stressful EOFY.
Software is an obvious solution to better visibility over your financial position. Come July 1, commit to a more efficient system that tracks your finances year-round, works in the background for you, automates significant pieces of work and allows you to focus on the parts of your business where you can add the most value.