Business Tax Tips - Prepare Your Accounts EOFY - Tips 1-9 Australia 2024

Tips 1-9 for preparing your accounts for the end of the financial year in Australia before 30 June are provided here.

1. Review your debtors (they owe you) and creditors (who you owe).

This involves assessing who owes you money and who you owe money to. For accounts receivable, identify customers who are taking a long time to pay, evaluate the effectiveness of your debt-collection efforts, and consider writing off the sale if necessary. This will allow you to focus on more profitable clients and prospects. Similarly, for accounts payable, assess the amount you owe and determine if you can settle these debts by the end of the year. If facing difficulties, explore the possibility of negotiating longer payment terms with your suppliers to maintain the relationship.

2. BAD DEBTS ?-Accounts Receivable, write off by 30 June to tidy-up

To ensure a tidy finish for the end of the financial year, it is advisable to consider writing off any bad debts in your accounts receivable by 30 June. If you have clients who have ceased operations or if your efforts to collect outstanding payments have been unsuccessful, it may be best to move on and write off these bad debts. This action can enable you to claim a tax deduction for the current year. It is important to thoroughly review all bad debtors and make sure that all reasonable steps have been taken to recover the debt before proceeding with the write-off. We recommend documenting this decision in the business's minutes or notes. One approach is to issue a credit or reverse invoice dated around 15 June and apply it against the original invoice to formalize the write-off.

3. DELAY INVOICING sales if too much Profit (seek tax agent advice)

Many businesses are taxed based on income at the time of invoicing (accrual basis), while some small businesses may be taxed when income is actually received (cash basis). In the case of income from construction contracts, taxation typically occurs when progress payments are invoiced or received. If your business is generating a substantial profit and you are considering reducing your tax liability, it might be beneficial to postpone invoicing for work completed in June until July, after the 30th of June. It is advisable to consult with your tax advisor to determine the best course of action based on your specific circumstances.

4. Pre-pay EXPENSES to reduce too much Profit (if appropriate) (to reduce profit)

Paying certain expenses in advance, such as rent, repairs, and office supplies before the end of the financial year, can potentially lower your tax liability for the current year. By making prepayments for expenses that are due early in the next financial year, you may be able to benefit from tax advantages sooner. It's important to note that the rules governing prepayments vary depending on the type of entity, so it is recommended to reach out to your tax agent for further clarification if needed.

5. Pay quarterly/monthly SUPER earlier (to reduce profit)

To be eligible for a tax deduction in the current financial year, Super Guarantee contributions must be made before 30 June. It may be beneficial to consider advancing the payment of the June quarter contribution. It is advisable to ensure that the contribution reaches the super funds in a timely manner, as some funds may require 5-14 days for processing.

6. STOCKTAKE and/or sell off old stock

Before 30 June, it is important to review your trading stock either through a physical count or from a perpetual stock record system. Small Business Entities may be exempt from conducting a yearly stock take if the value of stock has changed by less than $5,000 during the year. Tax is based on the value of stock at the end of the financial year, so it may be beneficial to consider selling or disposing of slow-moving stock to ensure that it is not included in the count.

7. Get more from your DIRECTOR’s BONUS – seek tax advice (to reduce profit)

If you anticipate receiving a bonus before 30 June, you may have the option to redirect your pre-tax salary or bonus into your superannuation fund instead of receiving it as cash. Similar to deductible contributions, this approach could potentially lower the tax on your salary or bonus and enable you to make use of the contribution caps applicable in this financial year. Once your funds are invested in super, the tax rate for contributions is only 15%, and earnings are also subject to a capped tax rate of 15%. This may offer a favorable comparison to investments held outside of superannuation in your own name.

8. Pre-pay investment LOAN INTEREST?for deduction (to reduce profit)

If you currently have a geared investment portfolio or are contemplating establishing one, you have the option to pre-pay 12 months' interest on your investment loan and claim the cost as a tax deduction in the current financial year. This strategy can help in managing cash flow more efficiently and potentially reduce your income tax liability for this financial year.

9. Pre-pay income protection PREMIUMS?for deductions (to reduce profit)

Whether you are employed or self-employed, income protection insurance offers reassurance regarding the security of your income in the event of illness or injury. Typically, premiums for this insurance are tax-deductible. By prepaying your annual premium before 30 June, you may be able to claim a full year of cover in advance as a tax deduction.

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