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Get tax time and cash flow for your business right
04 June 2021
At this time of year quick decisions are often made for tax reasons without proper consideration for the effect these tax time decisions could have on future cash flow in your business and if they make good business sense.
The following steps are designed to help you make more informed business and financial decisions at this time of year.
Prior to end of financial year (EOFY)
1. Paying superannuation (yours and employees)
Payment this financial year (before 30 June) will allow you the tax deduction this financial year on superannuation that would otherwise be due in July. You can view all sort of due dates related to tax and super at the ATO's Due dates by topic.
2. Rundown as much stock as practical
Stocktakes are never fun, so if you can avoid large orders prior to stocktake that will save time. You may also want to sell down your existing stock. Just make sure there is enough stock to meet July sales until your next order arrives.
Do you have stock that you can’t sell or will have to substantially discount to sell? Consider writing it down to an appropriate value.
3. Covid-19 impacts
For the latest information, refer to the ATO’s COVID-19 support for businesses web page. You might also take advantage of the Federal Government's instant assett write-off for eligible businesses. It makes sense to seek professional advice regarding the tax and superannuation implications of COVID-19 business relief.
4. Write off bad debts
Go through your debtors list and make a judgment on the likelihood of being paid in part or in full by your outstanding debtors.
You could also actively follow up debtors to seek payments and investigate alternative actions to recover these debts if appropriate.
After end of financial year
5. Use the opportunity to get your paperwork and financials up to date
End of financial year is not only about getting your business financials in order for tax time but also for yourself. Lodge your paperwork with your accountant as soon as possible in the new financial year and push them for your results.
Timely information will help you know where you are and make decisions about where you are going for the next year. You might also like to create a cash budget by following 3 simple steps.
Be careful of:
6. Deferring income to next financial year
If you wait to invoice customers until after July 1st you may not get paid until August or September.
7. Large purchases or pre-payments for tax deduction purposes
Problems can arise quickly in the new financial year if you do not properly budget for the cash flow impact of large purchases or pre-payments. There are also many deals and offers available at this time of year so don’t be tempted by the quick saving and make sure that you are making your purchases in the best long-term interests of your business.
This list is by no means exhaustive but is intended to be a starting point to help you make purposeful decisions. We highly recommend that you seek professional advice appropriate to your situation and your business needs. For more ideas and information, here are a few more tips to help you prepare for the EOFY.
The taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and their interpretation.