7 steps to get your business ready for tax time

The end of the financial year means one thing for businesses – it’s time to get your house in order.

Mark Cleaver, managing director of Bibby Financial Services, Australia and New Zealand says businesses need to be on top of cash flow. And that means working closely with your accountants and financial advisors.

“Knowing the exact financial position of your business and staying on top of your cash flow will help you set new business goals that are measurable and achievable,’’ Cleaver says.

Staying on top of your cash flow will help you set new business goals.

“You’ll then be in a position to develop a strategy for achieving those goals. It pays to establish these good financial habits and discipline; this will not only benefit your business in the next six to 12 months, but also for the next five to 10 years.”

To do all that, he says there are seven things businesses need to have in place.

1. Pay and clean up any super owing before 30 June

Cleaver say this is important because super is not deductible until it’s been paid. Ensuring all superannuation contributions have been paid mean you can apply for those deductions.

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2. Get your tax-deductible expenses in order

Cleaver advises small businesses to consider pre-paying services and suppliers, such as accountancy fees, up to a period of 12 months in advance. By bringing forward tax-deductible expenses and deferring income, he says, businesses can reduce their taxable income for the financial year. Ideally, small businesses should approach their suppliers now for all invoices up to 30 June 2015 and then organise payments to secure tax deductions.

Small businesses should clean up all invoices up to June 30.

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3. Write off bad debts

Cleaver says if you’re still chasing invoices from the last financial year, now is the time to write them off. Bad debts are tax deductible so they could be used to offset your taxable income.

4. Know the value of depreciating assets

The Government now allows small businesses with an aggregated annual turnover of less than $2 million to immediately deduct the value of each asset that cost less than $20,000. That applies to assets acquired from 7.30pm on 12 May 2015 until 30 June 2017. These assets can include office equipment, computers, printers and work tools. Cleaver advises businesses to keep track of assets for potential tax deductions and discuss your options with your accountant.

5. Be aware of all applicable tax benefits

Businesses with a turnover of less than $2 million could be eligible for numerous tax benefits. For example, from 1 April 2016, you’ll no longer need to pay Fringe Benefits Tax on any portable electronic devices that you provide to your employees for work-related use, such as mobiles, laptops and tablets. Cleaver says it’s a good idea to talk to your accountant so you don’t miss an opportunity to claim a legitimate benefit.

Businesses with a turnover of less than $2 million could be eligible for tax benefits.

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6. Be aware of relevant tax changes

The centrepiece of the Government’s $5.5 billion “Jobs and Small Business Package” announced in this year’s budget is a 1.5% tax cut for small businesses with annual turnover of under $2 million. That applies from July 1, 2015 for up to 780,000 small businesses. Cleaver says there have also been changes to depreciation rules for businesses with a turnover of less than $2 million. Ask your accountant about which tax changes affect your business.

7. Reward your staff

Cleaver says the end of the financial year is always a good time to reward hard-working staff and thank them for their contribution to your business. He suggests taking them out to lunch or consider rewarding them with a cash bonus. It may also be a good time of year to review their KPIs and present them with a refreshed business and marketing strategy.

Comments on tax and financial strategies outlined above does not constitute advice – always talk to your accountant before implementing.

For information about changes and legislation for small business, check out the ATO website.