Here are Fundamental Business Finance’s Top 8 ‘EOFY’ tips, to help you make the most out of this end of financial year:
1. Pay and clean up any super owing before 30 June
Businesses must ensure they are paying employees additional superannuation. As superannuation is not tax deductible until it has been paid, it is also important to ensure all superannuation payments owing are completed before 1 July, this is a great way of reducing your income tax bill. Business owners should be aware of the cash flow implications of the change and make plans accordingly.
2. Pay your outstanding tax debt
The ATO will disclose to credit reporting bureaus the tax debt information of businesses who have not effectively engaged with the ATO to manage these debts and initially only apply to businesses with Australian Business Numbers and tax debt of more than $10,000 that is at least 90 days overdue. If you need help in catching up your ATO payments, let us know.
3. Get your tax-deductible expenses in order
An easy way for SMEs to claim tax deductions, is to pre-pay relevant services and supplies such as office supplies or costs for supplier services, such as accountant fees, up to a period of 12 months or less. By bringing forward tax-deductible expenses and deferring income, you can reduce your taxable income for the financial year. Approach your suppliers now for all invoices made up to 30 June and organise payment arrangements to secure a great number of tax deductions. For any assets under $20,000 that need to be purchased, you can write off 100% of these purchases.
4. Be aware of all applicable tax benefits
Any business with a turnover of less than $2M is eligible for a wide range of tax benefits within areas such as Capital Gains Tax, Income Tax, Goods and Services Tax, and Fringe Benefits Tax. So make sure you are aware of any tax benefits that may be applicable to your business. This is especially important for small to medium business owners.
5. Know the value of your depreciating assets
Another tax opportunity for SMEs with a turnover under $2M, are available tax deductions on any depreciating assets up to the value of $6,500, purchased before 31 December 2013. Business assets which may fall into this value category include office equipment, computers, printers, work tools, etc. Make sure you keep track of assets within this value category for potential tax deductions.
6. Write off bad debt
According to the latest Dun & Bradstreet Trade Payments Report, the average number of days business-to-business payments are being made has increased, now sitting at an average of 56 days. If you’re still chasing invoices from the last financial year, now is the time to write them off. Bad debts are tax deductible and can be used to offset your taxable income.
7. Reassess your cash position
Starting the year with a healthy cash position is crucial. Ensure you review your cash management processes and consider the most appropriate funding solutions. There are a number of cash flow finance tools to help you better manage cash flow and funding. Debtor finance is gaining in popularity as it provides advances of up to 85% against receivables, without needing real estate security, and is scalable in line with the sales growth of the company.