By IQ Accountants IQ Blog June 21, 2016

EOFY Preparation – Bookkeeping

As the end of the financial year continues to get closer, I’ve had several clients calling me to discuss getting their records in to us in early July for tax preparation. Getting your business books as up to date and accurate as possible not only aids in the speed of the preparation of your returns but also in the efficiency and therefore minimises the cost. I’m always happy to offer suggestions and advice on ways to improve even the very tidiest of books because it’s win/win for everyone if we are able to get their work done in the most cost efficient and accurate manner.

5 things to do to check your bookkeeping is ready for tax preparation:

1. Review Financial Statements and Records

Reconcile Accounts: Ensure that all financial records are up-to-date and reconciled, including income, expenses, and business transactions. Accurate financial statements are essential for calculating taxable income and identifying eligible deductions.
Check Bank Statements: Double-check that all bank accounts, credit cards, and loans are reconciled and that there are no discrepancies.
Inventory Check: For businesses with physical inventory, do an inventory count. If your business is using the cash accounting method, you will need to account for the value of the stock at the end of the financial year.

2. Maximize Deductions

Prepay Expenses: You can prepay expenses before the EOFY (e.g., rent, insurance, and some subscriptions) to bring forward deductions and reduce taxable income for the current year.
Superannuation Contributions: You can make additional contributions to your superannuation fund before June 30 to reduce your taxable income. For concessional (pre-tax) contributions, the cap is $27,500 for the 2023–24 financial year. These contributions may include salary sacrifice, employer contributions, and personal contributions.
- Example: If you’re self-employed, you can make voluntary concessional contributions before the EOFY, reducing your taxable income for the current year.
Write-Off Assets: Under the Instant Asset Write-Off, businesses can write off the full cost of assets purchased under a certain threshold. If you haven’t taken advantage of this, consider buying necessary assets before June 30 to claim the full deduction.
- Thresholds: For small businesses (turnover under $10 million), the threshold for the instant asset write-off in 2023 is $30,000 for eligible assets.

3. Review and Pay Debts

Review Outstanding Tax Debts: If your business has any outstanding tax debts, now is the time to either pay them off or negotiate a payment arrangement with the Australian Taxation Office (ATO). The ATO is often more lenient with taxpayers who reach out proactively to manage their debts.
Consider Payment Plans: If you can’t pay your debt in full, work with the ATO to arrange a payment plan. Avoid accumulating penalties or interest by addressing any overdue amounts before the EOFY.

4. Check Your Employee Payroll and Superannuation

Ensure Employee Super Contributions Are Paid: Before EOFY, ensure that all employee superannuation contributions have been paid and reported. The ATO requires super contributions to be paid quarterly, but it’s a good idea to check if you’ve made all payments before the EOFY to avoid missing out on deductions.
Check PAYG Withholding: Ensure that the Pay As You Go (PAYG) withholding tax on employee wages has been calculated and remitted correctly. Incorrect PAYG withholding can lead to penalties and interest.
End of Year Payroll: Review your employees’ wages, bonuses, and other payments. Ensure the correct tax rates were applied, and that you’re ready to issue PAYG summaries to employees after June 30.

5. Review Capital Gains and Losses

Capital Gains Tax (CGT) Planning: If you’ve sold assets such as property, shares, or other investments, you will need to consider any capital gains tax (CGT) implications. If you’ve made a capital gain, you might want to offset it by selling underperforming assets that have incurred a capital loss.
- CGT Discount: If you hold an asset for more than 12 months, you may be eligible for a 50% CGT discount.
Tax Loss Harvesting: If you’ve made losses on certain investments, consider tax loss harvesting by selling those investments to offset capital gains, reducing your overall taxable income.

6. Review Business Structure

Tax Structure: Now is a good time to assess whether your business structure (sole trader, partnership, company, trust) is still the most tax-effective for your current situation.
Small Business Concessions: If your business qualifies as a small business (with a turnover of less than $10 million), take advantage of various small business tax concessions, including:
- Small Business CGT Concessions: These can reduce or eliminate CGT when you sell business assets.
- Simplified Depreciation: Businesses can use simplified depreciation rules to write off assets immediately, instead of spreading the deduction over time.

7. Complete Your BAS (Business Activity Statement)

Lodge Outstanding BAS: Make sure any outstanding Business Activity Statements (BAS) are lodged and paid. Your BAS reports GST (Goods and Services Tax), PAYG withholding, and other taxes your business is responsible for.
Check for GST Deductions: Ensure you’ve accounted for all eligible GST on purchases and business expenses.

8. Review Tax Offsets and Rebates

Small Business Tax Offset: If you’re a small business owner, you may be eligible for the small business tax offset, which can reduce your tax bill by up to $1,000.
R&D Tax Incentive: If your business is involved in research and development activities, check whether you qualify for the R&D tax incentive. This can provide a tax offset or refund on eligible R&D expenditure.
Low and Middle Income Tax Offset (LMITO): If you are an individual taxpayer and have a low or middle income, you may be eligible for the LMITO. This is a non-refundable offset that can reduce the amount of tax you owe.

9. Prepare for EOFY Financial Reporting

Audit Financials: Ensure your financial statements (profit and loss, balance sheet, and cash flow statement) are accurate and ready for submission. This is especially important for businesses preparing for an audit or seeking external investment.
Consult Your Accountant: Work with your accountant to review your financial situation and ensure your business is in good shape for EOFY reporting. They will also be able to help you identify any last-minute tax-saving strategies.

10. Plan for the New Financial Year

Set Financial Goals: Take time to review the previous financial year and set goals for the new year. This includes reviewing your business’s performance, creating forecasts, and budgeting for upcoming expenses.
Review Tax Rate Changes: Stay informed about any changes to tax rates, superannuation thresholds, or other regulations that might affect you or your business in the upcoming financial year.

Final Tips:

Don’t Leave it Until the Last Minute: EOFY preparation is not something to do at the last minute. Start planning well ahead of June 30 so you can optimize your tax position and avoid any surprises.
Seek Professional Help: If you have any doubts about your tax obligations, superannuation contributions, or financial planning, it’s worth consulting with a tax professional or accountant to ensure everything is in order before EOFY.

By taking these steps, you can set your business up for a smoother EOFY and minimize your tax liability, ensuring that you are fully prepared for the next financial year.

If you leave everything to your trusted bookkeeper, these steps are also a great way to check the book work makes sense. Our Gold Coast bookkeepers are fantastic and help you with your GST and record keeping compliance activities but it’s you that knows your business best and it always pays to double check. The IQ Accounting team have been actively assisting clients to move any desktop bookkeeping programs to cloud versions so please contact the office if you would like more information regarding the time and cost benefits available. Phone (07) 5576 0011 today!