EOFY Tax Tips for small business owners
As the fiscal year draws to a close, everyone’s attention is focused on one thing: tax returns.
It’s time for small business owners to close their books and start finalising their tax paperwork and accounting. But along with being the ideal time, the end of the fiscal year is also the time to seek all possible assistance in order to receive the best possible return.
With this in mind, our experts offered the best strategy to handle your tax responsibilities and get through the fiscal year 2022/23 in this week’s Let’s Talk.
Discover other Let’s Talk business topics
Jason Toshack, Vice President and GM ANZ, Oracle NetSuite
“Most business owners know too well the challenges of financial stability and the stresses of tax time. The most useful thing a business owner can do is ensure they are on top of their finances by keeping accurate records. Using software tools to do this, has become essential.
“These solutions track financial performance and provide accurate data to produce detailed reports. This is invaluable when it comes to managing and understanding taxes and staying compliant with local regulations, while also helping the finance team streamline tax requirements.
“Companies that operate in multiple jurisdictions will also find it easier to manage domestic and global tax needs on a single platform. This can help provide a clearer picture of the business’ overall health by analysing transactions down to line-item tax details.
“Compliance can also be a grey area for new business owners. By keeping your business’ financial data all in one place, it becomes easier to ensure compliance with the appropriate accounting standards, government regulations, internal policies and tax codes. An integrated system, can save time, reduce costs, eliminate manual calculations and significantly reduce errors.”
Carol Chris, Regional General Manager ANZ, GBG
“While small businesses will be busily getting their relevant financial documents and data ready for tax time, it will be important to also remain vigilant against financial criminals. This is a prime opportunity for fraudsters, identity thieves, spammers, ransomware attackers and more to target businesses as they are already in the process of sharing critical information. Financial criminals are often waiting for times like this because small business owners are less likely to be surprised by an expected email from the ATO, their accountant, or a big bank relating to their EOFY finances.
“It’s important for small business owners to apply the same rules as they usually would to their cyber safety, data privacy, and overall business security. Don’t click on unusual emails, don’t answer unsolicited calls, don’t share information with people you are unsure of, and keep all communications to people and organisations that have been confirmed as trustworthy.”
James Haslam, CFO, ELMO Software
“With the end of the financial year approaching, businesses that are yet to explore the range of tax rebates and incentives available to them need to get the ball rolling.
“In recent years a range of initiatives have been introduced to support small business investment, such as the instant asset write off and the small business technology investment boost. These measures have been designed to make it easier for businesses to invest in tools, systems and software that will help both their business and the economy grow.
“It’s important to consider how tax rebates and incentives can factor into your broader business strategy. For example, if you are considering new software to automate your HR processes or expense management there may be tax incentives available to support this purchase which can compound the benefits of increased efficiency with the tax benefit.”
Sarah Lawrance, Xero advisor, CEO of Hot Toast
“EOFY is always the perfect opportunity to review your business objectives and implement financial goals for the following year. This planning process provides you with an opportunity not just to build the framework around what you want your business to achieve but it also keeps you accountable as a business owner. Here are some top tips:
- Review revenue: As you start preparing your finances, it is essential to first review your revenue. Look at finalising outstanding work currently sitting within your business and invoice accordingly.
- Assess purchases: Secondly, before making last minute purchases to save on tax, evaluate with your advisor to see what the best financial option is. As a company, profits will be taxed at 25-30 per cent; for every dollar, you spend on a purchase. You are only saving 25c in tax, so make sure it’s worth it!
- Invest in technology: Lastly, utilising digital tools such as Xero can help you streamline your operations, creating efficiency and ease through technology. This will help you stay compliant when making claims for this EOFY.
“As we get closer to the new financial year, it’s a great time to reset, measure your success against your small business targets and identify what you want to achieve in the years ahead.”
Des Hang, Co-founder and CEO, Carbar
“With Australians now released from their homes, one thing that may come back into focus this tax time is how you travel for work. If you work as a sole trader or you have a small business and need a new car, it’s worth looking into the government’s instant asset write-off program. You can use this to immediately write off the value of a depreciative asset such as a work vehicle. If you purchase in June and file your tax return right away in July you’ll be out of pocket for less than a few months. There are limits and exemptions, so it is best to read the ATO’s article on this policy before considering this approach. For those that don’t have the cash flow but still need a car, there are plenty of other tax-friendly methods, such as a car subscription.”
Lisa Varker, Life Insurance Adviser, Compare Club
- “With IP premiums usually being tax-deductible before the end of the financial year is a great time to set up and pay the full annual premium so you can claim your tax deduction right away. This means you can claim it instantly instead of waiting up to 12 months to be able to claim the deductions.
- Small business owners often aren’t covered under work cover or workers’ compensation, so Income Protection policies are important if they want to keep an income flow.
- If small business owners are completing last year’s tax return now, it’ll make things easier when applying for income protection as they have their current income level to ask for.
- If you have insurance products inside your super (such as life cover) and want to claim a tax deduction, paying annually right before the end of the financial year means you can claim the tax deduction almost straight away.
- Self-employed business owners are able to set up superannuation owned life and TPD policies with ease as the premiums are considered personal contributions. This means that tax deductions may apply up to the maximum contribution cap of $27,500.”
Ross Simon, CEO and Founder and Director of Strategic Partnerships, BidFin
“When it comes to sustaining a healthy business ready for growth opportunities, optimising cash flow is the single most important factor.
“The end of the financial year is an opportune time for businesses to review business goals and consider implementing new technology; however, it’s important that this isn’t at the expense of maintaining the working capital required to sustain and grow the business.
“There are three questions for businesses to contemplate when considering new technology investments:
- What is the business looking to achieve in the next 12 months?
- What are the financial incentives for new technology?
- How do I fund the technology?
“With the current government tax incentives, such as the Small Business Technology Investment Boost, coupled with the right flexible finance option, businesses can affordably realise the benefits of the new technology with minimal impact to cash flow.”
Paul Sharpe, Co-Founder and CEO, Easy Business App
“Many small businesses use complex accounting software that has been designed for large organisations. Combined with poor record-keeping, this makes EOFY tasks more difficult than they need to be.
“Here are some tips to get on the front foot:
- Be organised with your records so it’s easy to identify tax deductions
- Gather your Payroll, Superannuation, and Invoicing records so you can check that your super, tax paid, GST and invoices match your reports and your BAS statements. Found a mistake? Let your accountant know
- For employers, do your final year-end STP file by 14 July 2022 so your staff can do their personal tax returns
- Found these tasks difficult? Consider using STP compliant payroll and invoicing software that’s specifically made for Aussie small businesses, and that you can use on mobile, laptop or tablet. Now is the perfect time so you’ll be in better shape for next year.”
David Lenz, Vice President the Asia Pacific, Arcserve
“Businesses are under severe pressure from rising costs. EOFY is the perfect opportunity for SMBs to rethink their operational expenditures and set the agenda for the new year ahead. It is also the time to consider the implications of the recent Federal Budget’s focus on cybersecurity and the Government’s technology investment boost to support digital adoption by small businesses. Every SMB EOFY checklist should address the following for greater cybersecurity resilience:
- Keep your guard up – Bad actors will look for opportunities to exploit a challenging situation and attack you when you’re most vulnerable. A proper backup and recovery plan lets you protect your data even if a cyberattack victimises you.
- All data is not equally valuable – If you’re on a mission to save money, it might not be necessary to store or back up every bit and byte of data in your business. Consider data tiering, a method by which less frequently used data moves to cheaper storage levels or “tiers,” helping you save money on data storage while avoiding damage to your most essential data. Maintaining healthy processes around data hygiene can help you efficiently retain and back up all your critical data—and offload the data you don’t need. Data tiering also improves energy and cost savings because you will need less computing power to store your business-critical data.
- Don’t skimp on data backup and security – You need to ensure that your data-protection program is not impacted by any budget cuts you consider. Any reductions to your data defences will come with costs down the road. One of the incentives within the Federal Budget boost will allow small businesses with less than AU$50 million in turnover to deduct an additional 20% of the cost incurred on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cybersecurity systems, or subscriptions to cloud-based services. Investments of up to $100,000 per year will be supported by this new measure. Look for cost-effective, next-generation solutions that enable you to safeguard your data and grow your business.”
Paul Presland, General Manager Small Business, ANZ
“Working with an accountant is a great way to stay on top of your books, but it’s an investment, not all business owners can make. Here are some tips to help you be financially ready for the EOFY process:
- Use your accounting software to manage transactions and generate insights: daily data can give you the best insight into how your business cash flow is going and where you’re headed.
- Research government support available for SMEs: stay up to date with tax incentives, rebates and deductions available to you and your sector.
- Consider separating your personal and business finances: talk to an ANZ business banker about our business transaction account options and personalised banking solutions.
“When it comes to running your business, following these tips could help you be financially ready for tax time.”
Elise Balsillie, Head of Thryv Australia
“Every small business owner across the country prioritises digitisation in the next financial year to mitigate the stresses associated with EOFY moving forward.
“Thryv’s customers regularly indicate there aren’t enough hours in the day to complete all the tasks on their to do list. The findings of a study recently commissioned by the company echoed this sentiment, revealing that small business owners are working the equivalent of one extra day (7.5 hours) per week outside of their regular business trading hours. And this doesn’t even account for the added pressures surrounding EOFY.
“Digitisation will reduce the amount of time any small business owner spends on admin-related tasks. Investing in an all-in-one digital tool will help. A key EOFY-related benefit is having easy access to soft-copies of important documents (such as invoices and receipts) when it comes to sitting down with your accountant or bookkeeper to complete paperwork.”
Stuart Balloch, Payment Specialist ANZ, GoCardless
“Did you know, the way you collect payments could have significant cost and resource implications in other areas of your organisation? This tax time, we suggest taking stock of what payments are actually costing your business. Whether you are a finance leader or CTO, it’s important to understand and be aware of the cost implications across the space.
“If we look at Credit and Debit Card transaction fees, for example, these can cost businesses up to 2 per cent of the value of the transaction, according to the ACCC. For an international card, that fee will jump again to about 2.9 per cent + .3, plus 2 per cent for currency conversions.
“If your business operates an EFTPOS machine, you’ll also need to take into consideration the associated fee structure on top of the card fees. This usually includes an establishment fee and a monthly fee that could be anywhere from $50-120.
“Looking at management costs, these usually aren’t the first that comes to mind, but they accumulate across the business in areas like chasing late payments. GoCardless’ most recent research conducted by Forrester suggests that the costs of late and failed payments for organisations can be as much as 10 per cent of the actual payment’s value. The time and resources required for admin teams to tackle this issue can balloon, with our research indicating that SMB owners can spend up to nine working days actually chasing payments.
“There are ways to combat these challenges:
- Ensure you’re offering preferred and seamless payment experiences for customers.
- Invest in payment options that reach the widest number of your customers.
- Highlight your preferred payment option in the UI of your checkout.”
Discover Let’s Talk Business Topics
Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.