As the end of the financial year rolls around, you may find yourself worrying more about wrapping up your finances and taking care of those last-minute financial tasks. These last-minute financial tips can help you maximise the end of your financial year.
1. Check Your Outstanding Invoices
What invoices do you have that are still unpaid at the end of the year? See if any qualify for bad debt, which can help reduce your tax requirements at the end of the year. This is also a great time to follow up with any customers who have let their invoices go unpaid or to issue late fees, if needed. Cleaning up your invoices at the end of the year can help prevent a great deal of confusion in the coming financial year.
2. Double Check Your Profit and Loss Statement
Your profit and loss statement is one of the most important documents related to your finances, especially as you get ready to file your taxes. A profit and loss statement, simply put, displays your business's income alongside its expenses. Not only does your profit and loss statement show whether your business has actually turned the anticipated profit this financial year, which can make it easier for you to pull in investors or get a loan next year if you need it, it's an important financial element that shows the government how much money your business has actually made this year when compared to your overall expenses. Make sure that you:
- Itemise your expenses, especially those that could lead to increased deductions.
- Have an accurate depiction of what funds your business has actually taken in this year.
- Have stayed on top of bank reconciliation so that your bank account accurately reflects the amount of money you have actually spent over the course of the year.
3. Know Your Deductions
As a small business owner, you need as many tax deductions as you can get to help minimise your financial burden. At the same time, you don't want to mistakenly claim the wrong deductions on your taxes, which could lead to unnecessary reviews and even penalties. Take a look at your business expenses this year, then let your accountant know about:
- The cost of owning, maintaining, and using your home, if you work out of your house.
- Depreciating assets within your business. This includes items like printers, scanners, laptops, and more. However, keep in mind that if you use your computer for personal purposes as well as business ones, it may not be included as a deductible expense.
- The cost of operating your business, including power bills, stationary, website ownership and maintenance, and other necessary purchases needed to keep your business running smoothly.
In order to claim a deduction, you must have actually spent the money associated with the deduction. Don't fall into the trap of assuming that you qualify for a "standard" deduction even though you haven't spent the money, which could lead to costly reviews of your taxes in the future.
4. Claim Your Assets
This year, you can claim up to $30,000 on an instant asset write-off. If you purchase a new asset for your business, you can claim a deduction for the business portion of that asset up to the $30,000 limit. This includes everything from coffee makers to vehicles, equipment, and more. It's important to note, however, that if you use an asset for both business and personal use, only the portion of the asset that is used by the business can be counted.
5. Check Out the ATO's Watchlist
Each year, the ATO looks for certain issues associated with business taxes--and they typically let you know what, specifically, they're paying attention to this year. Each year, the ATO will target something a little different to help ensure that tax law is followed to the letter. If you're working with an accountant, make sure they've checked the ATO watch list and that they've let you know what, specifically, you need to pay the most attention to as you provide them with information this year. While your accountant will do their best, they can only work with the records you give them, so make sure your information is updated and that you've carefully considered those issues the ATO is highlighting.
6. Make a Plan for Next Year
As one financial year ends and the next one begins, it's the perfect time to make a plan for next year. Which documents did you struggle to gather this year? What data did you have to dig through stacks of information to find? In addition to filing your taxes for this financial year, make sure that you're also making plans to streamline your taxes next year, too.
Do you need more help with your business taxes this year? If so, contact us today. We can help take the mystery out of filing your business taxes and make the task easier this year.