EOFY Tips, Tax Time 2020 + Upcoming Events
It’s that time of year again when we reflect on the year that was (and what a year it’s been!), implement some planning for the upcoming EOFY and income tax time.
We genuinely appreciate that for so many this may not be the top priority at present, however we send this out to do our absolute best to help ensure the upcoming EOFY and income tax time may go as smoothly as possible for you.
Of course, any information contained below is broad and general in nature, if you would like specific guidance pertaining to your business’ unique circumstances, please get in touch for chat here.
EOFY tips to help create and maximise tax affect – for action prior to 30 June
Get your accounting records in order. Spend some time catching up on the business’ bookkeeping. This can help to reduce accountant fees at tax time and also provide a great starting point for planning ahead.
The final months of the financial year can be the ideal time to analyse the past 12 months and use this insight to plan for the future. Developing realistic budgets for revenue and expenses, tax planning for the year(s) ahead, reviewing insurances, setting business goals for the next three to five years, assessing risk management and even considering succession planning are all effective ways to help maximise opportunity.
- Instant Asset Write Off
The instant asset write off scheme was increased to $150,000 from 12 March to 30 June 2020, and more recently extended to 31 December 2020. As at 1 January 2021, the instant asset write off is due to decrease back down to $1,000.
If your small business genuinely requires new equipment or assets, this can be an effective way help reduce your income tax bill. However, we highly recommend not purchasing items for the sake of an income tax deduction. The true benefit is only gained here if the asset purchase was going to happen anyway, and you might consider bringing that purchase forward to gain the income tax deduction. Otherwise, cash flow is king (particularly during these uncertain times) and keep your money in your business bank account for a rainy day rather than spending for the sake of a tax deduction.
An effective strategy for small business owners trying to minimise their tax bill can be to prepay expenses. For example, office rent, insurances or interest expense can all be claimed when paid. If cash flow allows and there is a net profit to be reduced, consider bringing some of these payments forward into June.
- Accounts Receivable
Review your accounts receivable (list of open invoices owed). Follow up on any amounts that remain outstanding and boost your cash flow immediately. If there are any unrecovered debts, it may be worth considering if any of these may be appropriate to write off as a bad debt, which can be an allowable income tax deduction.
It’s a good idea to make sure you are on top of all superannuation obligations well ahead of time. For employee superannuation contributions or personal superannuation contributions (a great option for self employed), these can often be an allowable deduction. If your business is looking to obtain that additional deduction, it may be worth looking to pay these amounts before 30 June (even earlier to allow for super fund processing times – many accounting software providers and complying super funds require at least 7 days processing time). For reference for employing entities, June quarter superannuation is not due until 28 July, by bringing this payment forward into June it can enable an additional 2020 FY income tax deduction.
- Invoicing (timing)
If your business operates on a cash basis, and many small businesses do, then you’ll be taxed on income actually received in the bank on or before 30 June. Keep this in mind when creating invoices and taking deposits for any upcoming work.
Alternatively, if your business operates on an accrual basis, then you’ll be taxed on income as per invoice date. So, if there is any work that you’re due to commence in the coming months, consider if the invoice could be created in July or beyond to push out income tax payable.
Disclaimer: For all work that has been completed, we do not recommend delaying invoicing for the sake of reducing potential taxable income in 2020 FY, rather consider the timing of creating invoices for any pending future work. If you’re unsure whether your business operates on cash or accrual basis, check with Holly (or your respective accountant).
*All tax agent services provided are authorised and completed under the supervision of Mode Bookkeeping Pty Ltd (registered agent number 25221498).
Income Tax Time
The new financial year is weeks away, which means tax time is almost upon us. We are already taking bookings for 2020 FY income tax time, if you’re looking for lodgement in July or August, we do recommend booking in as soon as possible.
Further information on the type of information we’ll request to prepare the tax return, indicative pricing and to contact us to book in, please click here.
The Freelance Jungle Presents “You Can’t Eat Air” – July 2nd at 6pm – 8pm AEST (online)
- Grant McCall – Rounded Accounting
- Nicole Leedham – Freelance Jungle
- Holly Shoebridge – Oceans Accounting & Advisory
- Monica Davidson – Creative Plus Business
- MC’d by Rebekah Lambert – Freelance Jungle
This event brings together creative professionals and industry supports to investigate why we continue to face issues with fair pay, late pay and no pay with advice, resources, practical strategies, advocacy and lived experience.
Save your spot here: https://www.crowdcast.io/e/we-cant-eat-air/register
Launceston Freelance Festival – July 5th – 7th (online)
Holly Shoebridge, director of Oceans Accounting, will be teaming up with Oliver Garside, Co-Founder from Rounded Accounting, to discuss how to “Demystify Accounting – Learn How To Save Time And Improve Your Bottom Line”
They’ll be discussing tips, tricks and techniques to help you save time, increase profitability and possibly come to really enjoy the business management and accounting aspect of operating a business!
Session on Monday 6th of July at 11:15 am
Tickets available here: https://events.humanitix.com/launceston-virtual-freelance-festival/tickets
If you’d like to discuss any of the information listed here, please feel free to reach out and organise a time to chat, either via email or online bookings here.