Tips for handling your company’s first EOFY
It’s getting close to June 30, which means the end of the financial year (EOFY) is fast approaching, and now is the time to get prepared with tax planning and preparation.
It’s getting close to June 30, which means the end of the financial year (EOFY) is fast approaching, and now is the time to get prepared with tax planning and preparation.
If you’re operating a startup and this is your first EOFY, it can be an even more daunting time.
It’s vital to set your company up for success by understanding your organisation’s current financial position, tax implications, and the tasks you must handle to get your business tax return lodged on time and executed correctly.
Here is a startup tax checklist to guide you.
Get organised early
Firstly, don’t leave everything until the last minute, as this leads to a lot more stress and higher chances of making errors with your tax return and other documents.
Belinda Spence, Senior Tax Manager at MYOB, says, “The first EOFY can be overwhelming, so it’s important to plan ahead — you don’t have to leave EOFY until June 30.
“The more time you give yourself to get your records and receipts organised and reconciled, the smoother and less stressful EOFY will be for you.”
Understand your reporting and lodgement obligations
Next, ensure you’re clear about exactly what needs to be done and when regarding reporting and lodgement obligations.
Spence suggests, for example, that it’s “important to make sure you know what date your company tax return is due, which is different to the due date for your individual tax return”.
You also need to ensure all payroll information has been reported to the Australian Tax Office (ATO) by the right due dates and that you pay superannuation for team members on time, too.
Plus, keep up to date with any regulation changes that occur, whether nationwide ones or laws and regulations pertinent to your firm’s industry.
For instance, there might be alterations to tax legislation or changes to the rules or limits on what you can deduct on tax, and so on.
Staying on top of these things will help you avoid errors and potential fines that arise after tax time.
Utilise beneficial tech tools
With time at a premium, it’s best to use one or more software programs that can help you to streamline EOFY tasks and reduce the chance of human errors.
Ditch outdated tools such as manual accounts kept on spreadsheets or paper, and move to products that will help you at tax time and throughout the year.
Various tools and apps, especially accounting software, will help you stay organised and reduce the number of tasks you have to complete manually.
Spence says, “Once your business income exceeds $75,000, and you register for GST, it is recommended that you start utilising software such as MYOB to help track and simplify your tax and accounting needs.
“MYOB software allows you to manage everything in the one place to reduce duplicated effort, leaving you more time to focus on servicing your customers.”
The company’s business management platform can take care of everything from invoicing and quoting, sending payment reminders and inventory management to payroll and roster and leave management.
It also aids SMEs by tracking and coding expenses, capturing receipt information with a few simple clicks, automating bill and expense reconciliation, and more.
All these benefits will help you immensely at tax time and beyond.
Know the benefits of converting to a company setup
Many people start their businesses as sole traders because their venture is a side hustle, or they’re unsure of the growth potential, etc.
However, often it makes sense to change your organisation’s structure to a company.
There are both general commercial and tax benefits for having a company versus a sole trader setup.
It depends on your vision for your business, but Spence notes that if you’re looking to convert, it’s best to get your accountant to assist you with the process, sooner rather than later.
She says, “There are several tax considerations when converting your business to a company, so it’s essential that you get an expert to assist you with the process.
“For example, a company is taxed at a fixed tax rate (either 30% or 25%, depending on the size of the business) compared to a sole trader who’s taxed as an individual at marginal tax rates (up to as high as 47%).”
There can be benefits relating to dividends, too.
“A company can distribute profits to its shareholders through dividends and may be able to attach franking credits to those dividends,” Spence notes.
“This then allows company shareholders to receive a credit for the tax already paid by the company on its profits.”
A company structure can also make processes easier if you want to scale your business or take on additional investors.
Spence says, “Unlike a sole trader, a company is a separate legal entity from the owner, which limits the owner’s personal liability in relation to business debts and liabilities.”
Consider the EOFY implications of changing from a sole trader to a company
If you’ve recently set up a company rather than a sole trader structure for your business, consider how this can impact how you go about EOFY tasks.
“There are additional lodgement and reporting requirements for a company that must be completed in addition to your lodgement obligations as an individual,” advises Spence.
“These include lodging a company income tax return, keeping up-to-date financial records, and annual ASIC reviews.”
Invest in advice
One final tip when handling your company’s first EOFY is not to try and do it all alone.
Lean on your business advisors, such as accounting and tax experts, who can help guide you through the various EOFY processes and lodgement schedules.
It can be tempting to try and manage every element yourself and save a few dollars, but unintended mistakes or missing deadlines can cost you more in the long run.
Follow these tips to help you feel more in control after June 30 this year and put yourself and your business on the right track for success in the next financial year.
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