An EOFY Checklist – What You Need To Know

The end of the financial year (EOFY) is looming, and with it comes a flurry of activity as businesses and individuals tighten their belts ahead of the taxman. If you're one of those people, don't worry – we've got you covered. Instead, check out our handy EOFY checklist to ensure you're on top of everything.

It's that time of year again when everyone is rushing around to get their finances in order before the end of the financial year. While for some, EOFY may mean sorting out their tax affairs, for others, it can be a time of big changes – such as buying or selling property, starting a new business or making significant investments. If any of this applies to you, then read our handy EOFY checklist to ensure you don't miss anything important!

As the end of the financial year draws near, it's time to start thinking about what you need to do to wrap up your accounts and ensure a smooth transition into the new year. To help make things easier for you, we've put together a handy checklist of everything you need to know. So whether you're looking to get your books in order or want to be prepared for EOFY tax changes, read on for all the information you need.

It's that time of year again – the end of the financial year is just around the corner! Like most people, you'll be scrambling to get your finances in order and make sure you take advantage of all the tax breaks available. To help make things a little bit easier, we've put together a handy EOFY checklist. Keep reading to find out what you need to know!

Something about the end of the financial year gets everyone excited – even if it is to get it over and done with! If you're one of the many looking forward to EOFY, make sure you don't forget these important things. This handy checklist will ensure you know what to do before June 30. Check it out now!

Let's get started!

How to Get Ready

Do not file your tax return under the category of "too difficult." If you are aware of what to include and how to make the most of any work-related deductions, you may be able to enjoy a cash boost at the end of the fiscal year.

1. Income

Many people are under the impression that their income just consists of what they receive from their place of employment. Take, as an illustration, the following and ask yourself if any of these apply to you:

• Salary/wages
• Lump-sum/termination payments
• Bank interest
• Dividends
• Employee share schemes
• Managed Funds income
• Rental property income
• Foreign income
• Capital gains
• Cryptocurrency gains.

2. Deductions

Without a doubt, the part of tax returns that causes the greatest consternation and confusion. This could include costs that you've incurred but for which you haven't been reimbursed, which could help lower the amount of tax that you owe.

• Deductions associated to employment
• Home office overhead costs.
• Education of oneself and advancement in one's vocation
• Sign-ups, subscriptions, and memberships are all included here.
• Expenses incurred for the vehicle and travel
• Expenses related to protective apparel, including laundering and dry cleaning
• Hardware and software, as well as assets that are subject to depreciation (such as laptops)
• Fees for an accountant or tax preparer
• Personal super contributions
• Expenses related to investment income, such as fees paid to financial advisers and margin loans
• Income protection insurance premiums
• Donations.

On the website of the Australian Taxation Office (ATO), you will discover additional information regarding deductions.

How To Lower Your Tax Bill

Even while the calculation of your tax liability is determined by subtracting your expenses from your income, there are other things you can do during the year to assist you better manage your tax liability.

1. Sort out your retirement account

Instead of depending just on the SG payments made by your company, you could choose to make additional contributions to your retirement account.

• Personal super contributions: You may be able to claim a tax deduction for your contributions up to the $27,500* (2021/22) or $25,000* (2020/21) concessional contributions cap, but you should be aware that this cap is for all concessional contributions and includes employer contributions as well. If you contribute up to the $27,500* (2021/22) or $25,000* (2020/21) cap, you may be eligible to claim a tax deduction. You should check with your financial institution to see if you are able to make further personal contributions from the money that is left over after taxes have been taken out of your salary.

*Your limit could be increased if you have concessional contribution cap amounts that havent been used.

• Co-payments: People with low or intermediate incomes who make personal contributions to their superannuation fund may be eligible to receive a co-contribution from the government, up to a maximum of $500.

• The employee salary sacrifice is an agreement between an employee and their employer in which the employee agrees to give up a portion of their salary (thereby reducing their taxable income) and put that portion of their salary into superannuation to increase their retirement savings.

• Payments made on behalf of a low-income spouse could qualify for a tax credit of up to $540, if the contributions were made to superannuation after taxes were taken out.

However, there are a few things that you should be aware of as well.

• When it comes to timing, your contributions must be sent into your super account by the 30th of June or they will be counted against the restrictions for the following fiscal year.

• Concessional contribution cap: the maximum amount of concessional contributions, including employer contributions, salary sacrifice contributions, and personal contributions for which you have claimed a deduction, cannot exceed $27,500* (2021/22) or $25,000* (2020/21). If you donate more than this amount, you run the risk of having more tax imposed on you.

*Your limit could be increased if you have concessional contribution cap amounts that havent been used.

• If you are over the age of 67, in order to make personal contributions, you will need to either meet the requirements of the work test or qualify for an exemption from the work test.

It is important to take note that it is suggested that the work test will be eliminated for individuals up to the age of 74 beginning on July 1, 2022, for personal contributions (both concessional and non-concessional). To continue to be eligible to make personal deductible contributions, individuals aged 67 to 74 will be required to either satisfy the work test or qualify for an exemption from the work test.

• Imagine you have some personal contributions that you would like to deduct from your taxes. If this is the case, you will be required to submit a valid "notice of intent to claim a deduction for personal superannuation payments to your super fund" and show proof that you have received written acknowledgement of your submission.

2. Understand Additional Levies

Everyone in Australia contributes to the funding of the Medicare system by paying a levy equal to two percent of their taxable income.

If you do not have an appropriate level of private health insurance and your income is over a specific level, you may be required to pay the Medicare levy surcharge in addition to your regular premiums.

However, it is important to consider the benefits and drawbacks of having private health insurance. You might also discover that you are qualified to get a private health insurance rebate, which is a sum that the government provides towards the cost of your premiums. If this is the case, you will be entitled for this rebate.

3. Be A Well-Ordered Landlord

Make sure that you have a copy of the annual tax statement that was sent to you by the management agent of your property, as well as information of any charges that you have paid personally, such as land tax, strata, insurance, or mortgage interest.

If you have made any changes that are considered capital expenditures, you should maintain the receipts for any depreciable items. Also, if you have ever bought or sold real estate, make sure to save copies of the sales contract, the settlement sheet, and any other costs related with the transaction.

In addition, it is recommended that you create a schedule for the depreciation of your property. At tax time, it demonstrates the deductions that may be taken for the depreciation of the building structure as well as the products that are contained within, which can result in large savings.

4. Offset A Capital Gain             

In the event that you make a profit on an investment during the course of the year, you might want to consider offsetting this gain by selling an investment that is underperforming or that is no longer meeting your requirements. On the other hand, this would result in a capital loss, which has the potential to lower the amount of tax that you owe and could free up some of your funds for use in exploring new investment opportunities.

5. Prepay Investment Loans     

Suppose you have a geared asset such as a rental property and the money to inject. In that case, certain lenders may allow you to prepay the interest on your investment loan for a period of 12 months if you have the capital available to do so. This will have the effect of bringing forwards your tax deduction into the current year, which could assist offset any capital gains or additional income that you have earned.

Best Practices for Making the Most of the Current Fiscal Year

1. Be sure to settle any outstanding super obligations by the 30th of June

Companies have a responsibility to their staff members to make sure they are receiving enough superannuation benefits. It is essential to ensure that all superannuation payments that are due are completed before July 1; this is an excellent way to reduce the amount of income tax that you are required to pay. Since superannuation is not tax-deductible until it has been paid, it is also essential to ensure that all payments have been made. The owners of businesses need to be aware of the consequences the shift will have on their cash flow and should plan accordingly.

2. Keep up with any necessary tax adjustments.

It is imperative that you are informed of any pertinent tax changes that normally take place at the beginning of a new fiscal year. To begin, you should speak with your financial adviser or conduct an intensive search of the ATO website for recent news and releases. This will put you in a good position to either capitalise on a change for the better or be prepared for a change for the worse if it occurs. A head's up gives one an advantage.

3. Organise your tax deductions

Prepaying for appropriate services and supplies, such as office supplies or prices for supplier services, such as accountant fees, up to a period of no more than twelve months can provide small and medium-sized businesses with a simple option to claim tax deductions.

By bringing forward tax-deductible expenses and postponing income, you can lower the amount of income that is subject to taxation for the current fiscal year. Contact your vendors right now to establish payment terms for any and all bills issued up until the 30th of June, and this will help you qualify for many tax discounts.

4. Recognise all available tax breaks

Any company that has a revenue of less than $2 million is qualified for a wide variety of tax benefits, including deductions and exemptions from the income tax, capital gains tax, goods and services tax, and fringe benefits tax, among others. Therefore, make sure you are aware of any potential tax breaks that could apply to your company. This is of utmost significance for proprietors of even the smallest of businesses.

5. Recognise the cost of your deteriorating assets

Small and medium-sized enterprises (SMEs) with annual revenues of less than $2 million are eligible for a tax credit of up to $6,500 for any depreciable assets that were purchased before the end of 2013. The worth of an organization's office furniture, computers, printers, and other work tools, as well as other similar assets, may fall into this category.

Be sure to keep careful records of any assets that fall into this valuation group in order to maximise your prospective tax deductions. For instance, the instant asset write-off is a temporary tax reduction plan that can be utilised by companies with annual turnovers of less than $5 billion.

6. Ensure that all of your assets that generate revenue are up to date

By organising your financing and repayments in a manner that satisfies the requirements of both your taxes and your cash flow, you may lower your operational costs, boost your productivity, and free up cash. Make an attempt to maintain the most recent versions of your assets that generate income. This will assist in maintaining the operational efficiency of your company and will maximise cash flow.

7. Write off bad debt

The typical amount of time it takes for payments to be made from one business to another has increased in recent years and now stands at 56 days on average. If there are any invoices from the previous fiscal year that you are still trying to collect on, now is the time to write them off. Your bad debts are a tax deduction that can be used to reduce the amount of income that is subject to taxation.

8. Review your financial situation

It is quite important to begin the year with a good cash position. Be careful to look through your methods for managing cash and think about the funding options that might work best for your situation. You may improve your ability to manage cash flow and funding with the assistance of a number of different cash flow finance instruments. As a result of its ability to make advances of up to 95% on receivables without requiring real estate as collateral and its scalability in accordance with the expansion of a company's sales, invoice financing is rising in popularity.

9. Perform a thorough cleaning of the books in the spring

You should evaluate and update your accounting systems to reflect the many tax and superannuation changes that will take effect from July 1 if you want to avoid having to pay back items like missing super payments or miss out on other possible tax-saving opportunities the next end-of-year financial year.

10. Reward your employees

At the close of each fiscal year, it is appropriate to recognise the efforts of your staff members and express gratitude for the contributions they have made to the company. Take them out to lunch, or think about giving them a monetary bonus as a reward for their hard work. Additionally, this year may be an excellent time to assess their key performance indicators (KPIs) and offer your updated business and marketing strategy.

How to Get the Most Out of Your End-Of-Financial-Year Sales

1. What actions should companies take to get ready for EOFY tax planning?

Examining your real profit and loss for the fiscal year up to this point and determining how your company is performing is a good place to start when it comes to the end-of-the-year tax planning for your company.

We advise beginning this conversation after the Business Activity Statement for the March quarter has been finalised, which typically takes place at the end of the month of April. This will provide you nine to 10 months' worth of data regarding the performance of your firm. The next step is to create a more precise cash flow prediction up until June 30 and ensure that there is sufficient time for tax preparation in May and June.

If the company has predetermined budgets for expenditures, you will want to be sure that you spend your quota rather than letting it expire or spending frivolously on products that might not be used on or soon before June 30. This is especially important if the company has defined expenditure budgets.

2. What advantages do EOFY sales offer companies?

The end-of-financial-year sales period can be beneficial to firms in five primary ways. These are the following:

• Decreasing annual profit to bring down overall tax liability by increasing the amount of costs that are tax deductible before the end of June.

• Gaining access to amazing offers and successfully improving future revenues by purchasing products at a discount.

• The acquisition of the appropriate tools will, in the long run, result in increased productivity, decreased expenses, and less stress.

• Getting office tasks off the ground, such as backing up computer systems or filing away outdated documents.

• Simply investing in new machinery can open up new avenues for growth in the form of expanded product lines or additional services. This is contingent on the capability of workers as well as their skill sets (both in terms of time and space). If there is one thing that businesses can take away from the events of the previous year and the epidemic, it should be the significance of making their organisations more flexible.

3. What is the best financial advice for SMEs and large companies?

SMEs

Because there are significant tax breaks available on an annual basis to small businesses, it is essential to have a solid understanding of the tax regulations that apply to your organisation.

Imagine that your company has an annual revenue of less than $10 million, but that this number will rise to $50 million on July 1, 2021. You have the option to skip stocktakes and claim a tax deduction for prepayment of expenses up to a year in advance, and you can do so if the value of your stock is within $5,000 of what it was at the end of the previous fiscal year.

Large businesses

Larger enterprises would not have been able to take advantage of the previous Instant Asset Write-Off regulations if they had made any purchases of assets. Nevertheless, they will be qualified to receive the Temporary Full Expenses concession in the fiscal years 2020-21, 2021-22, and 2022-23.

A company with a turnover of less than $5 billion can immediately deduct the business portion of the cost of any qualified new depreciating assets purchased this year, regardless of how much those assets cost under this concession. This benefit is available for the next three years.

In order to qualify for second-hand assets, your annual revenue must be less than $50 million. The depreciation of motor vehicles is the one exception to this regulation; nevertheless, the amount of the deduction that can be taken is limited to the $59,136 that can be written off for business purposes.

Loss Carry Back Tax Offset

In addition, if your company has a yearly revenue of less than $5 billion, you are eligible to make a claim for a refund of the tax that was paid the year before according to the new Loss Carry Back Tax Offset laws.

This has significant positive effects on cash flow since it allows you to contribute to the funding of an asset purchase that results in a tax loss right away rather than waiting until profits are achieved in subsequent years. Be aware that in addition to the turnover requirement, this concession is only accessible to enterprises that are organised as companies and have adequate franking credits. It is not available to businesses that are run by sole proprietors, partnerships, or trusts.

4. Any suggestions for companies hoping to benefit from EOFY sales?

During the end-of-the-year sales, we offer the following top three tips for responsible and sensible spending by businesses:

• Make sure that all of your purchases are tax deductible, but avoid spending money only for the purpose of reducing your tax liability. For instance, if you are operating your organisation as a business, you should be aware that you will only receive 26% of what you put in.

• Use your money carefully. Check to see whether the things you intend to buy will be beneficial to your company either now or in the future. Will it save you money or make things easier for you to do? Think of things that will help you save time and money in the long run.

• It's all about the cash flow. Ensure that your company has the financial resources necessary to maintain operations and fulfil its ongoing obligations, such as payments to employees and suppliers, taxes, and superannuation. You might need to have a conversation with the bank in order to aid with your cash flow from time to time or in order to fund some expensive purchases. Nevertheless, proper control of one's financial flow as well as debt is essential.

What Impact Will COVID-19 Have on the Financial Year?

Since the implementation of COVID-19, our typical activities have evolved, and as a result, the Australian Taxation Office (ATO) has taken measures to simplify the process of claiming deductions that are commensurate with the evolving nature of the workplace.

Home office expenses

The Australian Taxation Office (ATO) has introduced a simplified method for claiming a deduction for additional running costs while working from home. Beginning with the 2020/21 financial year, taxpayers will be able to claim a flat rate of 80 cents per hour for all running expenses rather than calculating an amount for each expense individually. This is intended to simplify the process of claiming a deduction for additional running costs while working from home. Expenses include:

• Phone and internet
• Cost of heating, cooling and lighting of the work area
• Printing and stationery
• Equipment, including computers, printers and furniture.

You can, of course, continue to calculate your real operating expenses if that is something that interests you.

As with most deductions:

• You must have utilised the funds in some way.
• It is necessary that the cost be closely associated with the production of your income.
• In order to provide evidence of it, you need to keep a record.

If you want to employ the streamlined approach, it is important to maintain a record of the number of hours you worked from home by utilising timesheets or keeping diary notes.

If your employer provided you with a stipend or reimbursement to offset the costs of working from home, you are required to report this as income on your tax return and are eligible for a deduction under the circumstances described above.

Visit the website of the ATO to learn more about deductions for people who work from home.

Make Preparations For The Future

• The close of the fiscal year is an excellent opportunity to take stock of where one's finances stand at the present moment.
• Do you anticipate that there will be any kind of shift in the next year?
• Have you received a tax refund that you can put towards the expansion of your wealth or the reduction of other debts?
• You have a tax liability; should you have set aside more money in order to pay it?

The good thing is that we always have an End of Financial Year, so you will always have the opportunity to put any lessons gained into practice. In addition, getting the assistance of an accountant or tax agent can assist you in making plans, researching your available choices for minimising your tax liability, and increasing the amount of money you get back.