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Following-up on my post from last week, below is a checklist I have personally built up over time and expanded out for this post. It doesn't have everything but is a good starting point for getting into the habit of preparing for taxt time. Bear in mind I'm not a tax advisor, this is just my list I use as a business owner that I want to share with you. Yours will need to be different so get your advisor involved. You need them to do this and they love engaging on the interesting stuff like advice that pulls them away from the bread and butter compliance work.
Donate to charities - Starting with the most obvious but the most rewarding one first. At Saasu we donate to Kiva micro loans charity. It's a great time to up the philanthropic level with the obvious tax benefits of doing so helping leverage your contributions. Always check the charities status for deductibility before committing.
Expense advancing or deferral - See what expenses you can delay versus what you can bring forward based on your P&L aims. Note: if your tax is on a cash basis this may not work if you haven't also paid for the goods and services. The best trick here is to run a trial balance from your accounting system and step through each line considering if there is something you can do to affect that line.
Income advancing or deferral - Minimise or defer income where possible. Defer sales, delay realising profits on assets. Allow for CGT relief that may be available due to depreciation or rollovers.
Switch accounting systems - 1 July is a great time for simple business models to switch accounting systems. For larger businesses you could enter a parallel trial where you can run side by side against your existing accounting system. You then cease using your old system once you are confident your new system is working well in a numbers and workflow sense.
Bad Debts - Write off bad debts but consider that if you report on a cash basis this may not provide any P&L impact. Check with your advisor.
Set next year’s budget - As you are in the real world, your activity next month is probably mostly locked in from an expense perspective. Budgets should be set well before EOFY. Look at variances to last year’s budget. Set your targets for sales, production and services activities.
KPI review - Go over your business KPIs to ensure you have a good backward, present and forward looking set for each area in your business. If you don't have systems in place that enable a data driven culture in your business, then start looking to buy online apps that can do this.
Policy - Do a policy check on matters such as revenue recognition, project payments, credit risk on customers and ensure that you have these optimised for cashflow and taxation purposes.
SOHO and BYOD - Survey staff as to who is working from home and how often. Inform them that they can enquire with their accountant for eligibility to claim work related expenses. You would be surprised how many staff don't do this. Work out if bring your own device (BYOD) is something that works for you and them. Sometimes the reduced balance sheet burden of assets can be passed on as higher pay while staff BYOD. There may be tax benefits for them to buy a device before 30 June. Check for FBT-exempt work items you need to buy before 30 June like mobiles and laptops that employees may need.
Inventory/Products - Do a stocktake to capture write-offs, write-downs and write-ups. At the same time look at the age of your inventory, stock turn rates and most importantly (if you import or export) the foreign exchange (FX) risk associated with the current spot FX prices versus what you transacted at. Reconsider if you should (or can) remain in the Small Business Tax regime or look at leaving if it works out for the better.
Superannuation - Make sure all your staff super due and payable is paid up. New laws coming into effect are much tougher on directors who haven't paid.
Get digital and physical paperwork in order - Ensure you have digital or physical copies of expenses and card/bank statements for the year. The new year gets busy and you won't want to be pestering staff and management for copies of statements and receipts when they are trying to get the new year off to a cracking start. Your accountant may need all this to get the tax returns done and substantiate claims. Convert paperwork into digital versions via services like Shoeboxed, Invoice Smash or Invitbox.
Financials - Despite your accounting firm doing your financials you should be doing them yourselves also. Prepare a draft P&L, Balance Sheet and Cashflow Statement. Use these to identify ways to improve the profile of your year end statements. It may highlight beneficial actions like paying down debt, accessing equity from owners or other strategies that can improve the capital structure of the business. Do a cashflow forecast to establish funding needs for the next year.
Asset Purchases - Consider asset purchases prior to 30 June. Smaller turnover business may be able to deduct 100% upfront on small asset purchases less than $6500 if you are in the Small Business Tax (SBT) regime. There are some nice pickups on motor vehicles also introduced last year.
Pre-paying - Some tax strategies are available to pre-pay interest to reduce your tax; pre-paying licences also. Some telco's will let you roll over phone contracts a little early without penalty. You may have the dollars to buy a new handset. Cloud software providers may also allow you to extend or lock in future years early. Domain names, business name rego's, data/cloud hosting services are all potential candidates for early renewal prior to 30 June. Check with your advisor as to what you can and can't book early as expenditure. Bear in mind that the rules differ based on your business tax regime and also where specific rules apply such as pre-payments that exceed 1 yr.
Do a rate review - Look at what interest rates you pay, receive and what merchant and payment gateway rates you pay. Negotiate as it is very rare that you will be worse off for having tried.
Equity Tax Decisions - if your business is in a position to issue, buyback or otherwise alter your capital structure consider you may be able to act now and still book transactions in this financial year that have some tax benefit. Shareholders meetings before 30 June may enable you to lock in Directors fees, dividends and other choices with tax implications suiting pre 30 June booking. It may be better to defer though. It depends on the tax circumstance of your individual investors.
Asset Valuations - Review your fixed assets. Depreciate, write-off or write-ups may be possible. Engage quantity surveyors to help gauge the market valuation of assets if dollars justify this approach. You can generate unexpected P&L benefits.
Reconciliation - Major accounts should all be reconciled. Bank accounts, company credit cards, GST/VAT accounts, assets, payables and receivables.
Review leave liabilities. Many companies run these unfunded. Setting up an account to hold funds for these purposes can work if you have available capital to do so. It's also worth checking if you have contingent liabilities not booked. For example offering access to products or services that are ongoing and without expiry have a perpetual profile and thus may require a liability to fund delivery for life.
Review product prices - Pricing adjustments are easiest at EOFY. There is some expectation that inflation warrants changes once a year so there is already some customer expectation you can monetize. Don't rule out dropping prices. Many industries are driving in that direction. The commodification status of your industry product or services sets the tone for price hikes versus cuts.
Foreign Exchange tax and risk - Look at FX gains and losses and what you need to realise. Do this with your advisor and along with ATO published rates you can work this one out together. You should also discuss FX risk in your business model. If you import or export you are very likely to have FX risk. Consider hedge strategies with your advisors and bankers for future years.
Payroll Compliance - Start collecting data required to prepare staff payment summaries. Old data can cause incorrect Payment Summaries. You need up to date names and addresses. Check your wages thresholds against state limits.
Regulatory changes - Many regulatory changes occur at financial year end. Review the main government websites such as ato.gov.au, fairwork.gov.au, asic.gov.au and the various state revenue offices for payroll and state taxes.
Eligibility checking - Check for Small Business Tax (SBT) regime eligibility, Payroll tax rebates such as offered by the NSW Government on new hires, R&D Tax concessions, Government Grants and other programmes and benefits you could get involved in, to help your tax and funding position.
There are other things to consider at a personal level for owners and staff not discussed here. Trust structures and multi-company entities haven't been covered either. The above is a general consideration list for simple small companies. Even so, for a complete thorough review you should be planning and structuring with your tax advisor.
