Checklist for the end of financial year

As the end of the financial year (EOFY) approaches, small businesses need to start preparing for tax time. This month is a great opportunity to get the ball rolling and our EOFY checklist is the perfect tool to help you get started.

Start by reviewing your financial statements, including profit and loss statements, balance sheets, and cash flow statements. This will give you a clear picture of your business' financial health and help identify any discrepancies or areas that need attention. This is also a good time to ensure that all transactions are being recorded accurately and that your accounts are reconciled.

Accurate and complete record keeping is essential for any business. Make sure all your financial records are up to date and organised. This includes invoices, receipts, bank statements, and any other relevant documents, including records or declarations that demonstrate your fringe benefits tax (FBT) calculations and support your FBT position. Proper record keeping not only helps you monitor your business but will also help come tax time when you need to substantiate deductions. Consider using digital software or tools to manage your records and to help reduce the risk of errors. If you receive lots of mail, you can also switch from paper to digital correspondence to help manage your records. You will need to ensure you keep these records for five years after you lodge your return.

Follow up on any outstanding invoices and ensure that all payments are collected before the EOFY, this is especially important if your business accounts for its income on a cash basis. Doing this will improve your cash flow, provide you with a more accurate picture of your financial position and ensure you have money ready to meet any future obligations. Additionally, make sure all your bills and expenses are paid to avoid any late fees or penalties.

With tax time coming up, think about the expenses you’ve incurred while running your business, and which ones you’re eligible to claim. If an expense was for your business and not a private expense and you have records to prove it, you can claim a deduction for it. This could include office supplies, equipment, and utilities.  

The ATO allows deductions for expenses you incur while running a business or working from home. This includes running expenses (like electricity, internet use, and office supplies) and depreciating assets (like technology and office furniture). In some cases, you can claim occupancy expenses (like mortgage interest, rent or council rates); but it depends on how you operate your business from your home. There are two ways you can calculate your deduction for your running expenses: the fixed rate method and the actual cost method. The fixed rate method allows you to claim a set amount per hour worked from home for your running expenses, while the actual cost method requires you to calculate the exact expenses incurred. Ensure you keep detailed records of your working hours and expenses to support your claims.

All businesses must account for the value of their trading stock at the end of each income year (closing stock) and at the start of the next income year (opening stock). If your business buys or sells stock, you should conduct a stocktake as close as possible to the end of the financial year. This will help you identify any discrepancies, such as missing or damaged items, and ensure that your inventory records are accurate as any changes in closing stock will have tax consequences. An accurate stocktake is essential for preparing your records and your tax returns.

Start gathering your records and the information needed to prepare your tax return. This includes financial statements, receipts, invoices, and any documents that can support claims for deductions. If you use an accountant or tax agent, ensure they have all the information they need to complete your tax returns accurately and on time. If you use a tax agent, you may also receive extra time to lodge your return, remember to check that they’re registered with the Tax Practitioners Board.

Finally, take some time to plan for the new financial year. Set a budget, forecast your cash flow, and identify any potential challenges or opportunities. This will help you start the new year on the right track and give your business the best chance to grow and thrive. For example, can you make it easier to meet your tax obligations, like setting up another business bank account for your tax and super so it doesn’t get caught up with your cash flow.

Keeping accurate and complete records, knowing your deductions, and planning ahead are key to being ready at the end of the financial year. Make sure that you seek professional advice if needed and keep up to date on any potential changes that could impact your business’s taxation affairs.

*  Optus does not provide tax advice, this article has been prepared by the Australian Tax Office for guidance only.