Ready for tax time? Our end of financial year checklist for small businesses has you covered

It’s that time of year again for small businesses. However this year couldn’t be any more different than if say, a global pandemic was continuing to impact financial markets, business and economies across the globe. 

And yet here we are. 

But this time, we’ve all been running our businesses for an entire financial year with COVID an ever present threat and there’s been more than a few tax changes. To make sure you claim everything you’re entitled to claim, we’ve put together an end of financial year (EOFY) small business checklist of things that you might miss out on otherwise.

Onboard a good accounting team

We keep saying it because it’s true. Especially in the current economic climate. Of course, the team your small business needs will vary depending on the size of your business. But the bottom line is that you need good people to help your business survive and thrive. 

Know what you're entitled to claim as a small business this end of financial year

Is your business eligible for any of the government incentives or stimulus packages announced in the federal budget? 

Changes to company tax rates - a small tax cut from 27.5 percent to 26 percent for SMEs applies for the 2020-21 tax year. It will further reduce to 25 percent in the 2021-22 financial year.

Fringe Benefits Tax (FBT) - the ATO appreciates that some employers are offering benefits they wouldn’t usually provide due to COVID, so they’ve agreed to some concessions and exemptions.

Temporary asset write-offs – if your business turns over less than $5 billion annually, you can deduct the full cost of eligible depreciating assets bought after 7:30pm on 6 October, 2020. This includes the costs to improve existing assets. There’s no cost limit for this deduction.

Temporary loss carry-back – again with a turnover of less than $5 billion each year, if your business has lodged tax returns for the loss year and the previous five years, you can offset previously taxed profits as far back as the 2018-2019 financial year.

JobMaker credit – partially subsidise wages for young (16 to 35 years) employees your business hires. Available for up to twelve months from the employment start date, you can claim:

• $200 per week for eligible employees aged 16 to 29 years
• $100 per week for eligible employees aged 30 to 35 years
• up to $10,400 for each additionally created job.

JobTrainer subsidies - means thousands of young people (17 to 24 years) can take low-fee or free courses through TAFE. Employers receive a 50 percent wage subsidy, up to $28,000 per year, for hiring a young person in the scheme.

Deductions - you might want to consider prepaying some of your next financial year's expenses in the current financial year. This is because up to 12 months of the following year’s expenses can be deducted in the current tax year. Check out our previous article on what deductions you may be able to claim. 

Keep your paperwork up to date and ready for the end of the financial year 

The ATO requires all business owners to keep accurate records of all financial transactions they made during any financial year. And keeping paperwork up to date during the year can help make your life run smoothly at EOFY time. 

Just some of the paperwork you may need to have ready for your accountant:

• A full profit and loss statement with receipts for sales and expenses
• BAS statements for the year lodged with the ATO 
• A summary of debtors and creditors
• An annual summary of employee superannuation contributions 
• An annual summary of PAYG withholding, FBT and GST
• A stocktake detailing all stock on hand and its value if annual aggregated turnover is more than $10 million but less than $50 million. For turnover less than $10 million, it's only needed if there’s a difference of more than $5,000 between stock value at the beginning and end of that financial year
• A record of assets for depreciation and CGT purposes. You can read our blog on everything you need to know about minimising your investment property tax (capital gains tax) for more detailed information
• You’ll also need to include in your tax return any payments received from the JobKeeper program this financial year

Understanding the pay as you go (PAYG) tax system 

You can read more about this here but in a nutshell, the PAYG system is divided into two simple concepts: 

• PAYG instalments, and; 
• PAYG withholding. 

PAYG withholding is for employees. Your employer withholds tax from your regular pay packet and sends it to the ATO on your behalf. 

PAYG instalments allow individuals or companies to prepay a chosen amount of tax in any one financial year. Amounts are calculated based on the taxpayer’s most recent tax return and then used to estimate the next financial year’s tax payable. These amounts are further broken down into quarters so can be paid in instalments.

Check out the ATO's new and improved online services for sole traders

If you’re a sole trader with an ABN, the ATO has made it easier than ever to get your taxes sorted. Some of the handy new features include:

•  requesting a refund or fund transfers between accounts
•  lodging super guarantee charge statements
•  sending secure messages
•  submitting STP (Single Touch Payroll) deferrals and exemptions, and;
• lodging private ruling, objection and further information forms.

Partnering with you to be better off 

During this time of great uncertainty, quarantine, lockdowns and continual interruptions to small business across the country, the team at Kelly+Partners have been by your side, helping you be better off. 

From helping you to decode the NSW budget to planning for the future. We’ve even shared some small business tax planning ideas and helped you find those last minute working from home tax deductions.

As the end of the financial year nears, there’s no denying it’s been a challenging year for small businesses. With no clear end in sight, our team of financial experts will stay the course with you. We’ll keep you updated regularly and, as always, offer the personalised assistance for which we’re renowned. Whatever you need, help is just one click away. 

To get started today on your personalised financial plan, contact your Client Director. Not a Kelly+Partners Client yet? Click here to book a discovery session!