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Finish off the financial year:

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In this short passage, we will discuss what you may want to do before the financial year end, and how you could close your books properly for the financial year.

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Before the financial year end

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Instant asset write-off deductions

If your business is about to purchase fixed assets, you may consider completing the purchase transactions before 30 June to claim tax deductions in the current financial year. This applies to the items such as vehicles, tools and business equipment. You may utilise the $20,000 instant asset write-off, available to businesses with a turnover of less than $10 million. The $20,000 threshold applies on a per-asset basis, allowing eligible businesses to write off multiple assets. The current instant asset write-off has been extended until 30 June 2025.  

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Superannuation contributions

You may want to make your final superannuation contribution payment for your business before 30 June, if possible. You may note that you can only claim tax deductions for the superannuation payments in the financial year that you have actually made the payments. You may also consider making additional tax deductible personal superannuation contributions. The current annual concessional cap is $27,500 per person. This will increase to $30,000 in the income year 2024/25.

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Carry forward unused concessional contributions

The carry forward rules may allow you to utilise unused concessional cap amount from up to 5 previous financial years if your total superannuation balance is less than $500,000.   

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Prepay business expenses

An eligible small business with less than $10 million turnover can claim a full tax deduction of prepaid business expenses up to 12 months in the current financial year.

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Defer capital gains 

If you have to sell a capital gains tax asset towards the end of financial year, you may consider entering into the contract of sale after 30 June. This will defer the capital gains tax to the following financial year.  
 

Vehicle logbook

If you have been using logbook method to claim vehicle deductions, you will need to record the odometer reading at the end of the financial year. 

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Stock-take

If you keep trading stock for your business, you will need to conduct a stock-take on 30th June and use the stock-take value for your tax calculation. An eligible small business with less than $10 million turnover can choose not to conduct a stock-take, as long as the change of your stock value between the beginning and the end of the financial year is $5,000 or less.

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Profit distribution

If ​you operate your business through a family trust and the business makes a profit, you are required to decide on your profit distributions before the end of the financial year. If your business structure is a company, you also need to review whether distributing dividends or paying additional salaries will be more beneficial. Often, you also need to consider if the company has any outstanding shareholder/director loans and available franking credits when making these decisions.

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Keep your supporting documents

You need to​ keep supporting documents that can substantiate your deductions and GST credit claims. The ATO may request you to provide documentation to verify the claims included in your tax returns and business activity statements. For example, you need to have a tax invoice from the supplier in order to claim a GST credit. In general, you have to keep your records for five years from the lodgement date. 

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Single Touch Payroll

The ATO has already implemented Single Touch Payroll phase 2 which is capturing more payroll information. All businesses including employers paying to closely held payees such as family members of a family business or directors/shareholders of a company also need to report payroll via Single Touch Payroll.

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After the financial year end

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Bank reconciliation

One of the most important year-end tasks is to ensure that you have entered all transactions for the financial year, including sales, purchases, payments, receipts and payroll related transactions. You also need to reconcile all your bank accounts. If you use XERO or MYOB, you may take advantages of their bank feeds features or download your banking transactions and import them into the software. These will significantly speed up your data entry process.

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Payroll

If you process Single Touch payroll with Xero or MYOB, you will need to follow through their procedures to finalise the payroll for the financial year before 14th July. 

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If you have employees and have not implemented Single Touch payroll for any reasons, here are few more tasks for you:

• Prepare and give each employee a Payment Summary by 14th July.

• Send the PAYG Payment Summary Statement with a copy of the Payment Summaries to the ATO by 14th August. This could be done with your accounting software.

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If you pay $58,333 or more salaries per month, payroll tax may be applicable to you. You would need to comply with the payroll tax requirements. ​

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Minimum wages

The minimum wage requirements normally change yearly. Most changes take effect on the first pay period after 1 July. It is important to review your industry awards and the national minimum wage when processing the first payroll of the new financial year.   ​

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Fringe benefits

Fringe benefit tax (FBT) may be applicable to certain benefits you provide to your employees. Normally, vehicle salary packaging is a great way to achieve tax savings. This may arise FBT. As an employer, you would need to ensure that the FBT liability for the year has been reduced to nil by the employee contribution (after-tax sacrifice). Otherwise, you may need to report and pay FBT separately. If you are registered for GST, you may need to include the GST on employee contributions in the Business Activity Statement.

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Superannuation

The superannuation guarantee is currently 11% of an employee’s ordinary time earnings. This will increase to 11.5% from 1 July 2024. You must pay the superannuation guarantee contributions at least four times a year and within 28 days after the end of each quarter. The contribution due date for the quarter April to June is 28 July.

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Review the key information

Finally, you may have to review the profit and loss statement, and balance sheet for the financial year, as well as the aged payable and receivable reports, and check the tax code allocations in your Xero or MYOB file.

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Provide the information to us for preparing your tax return

There are a number of ways you can provide the information to us. With MYOB AccountRight online, MYOB Business, and XERO, you may let us work on your accounts online. If you use older MYOB desktop versions, you may simply email us the backup file. If you use a different accounting system, you may provide us with your profit and loss statement, and balance sheet. We will review the reports and let you know what other documents we may need from you.

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Vincent Wan

CPA, Registered Tax Agent

June 2024