Getting your business’s end of financial year work done smoothly is no small task. This handy checklist offers a quick overview of the key processes and major to-do items.
End Of Financial Year (EOFY) isn’t just a marketing opportunity for businesses looking to entice business customers to make the most of available tax deductions (although that is a very popular approach). It’s also the most important time of the year for business owners to maintain compliance and set their business up for success in the following 12-month period.
There’s no wonder, then, that tax time induces a certain level of anxiety among many business owners – but it doesn’t have to be that way. In fact, some business owners outsource and automate their EOFY processes to the point that tax time never bothers them again.
If you’re not one of those hyper-organised types and you’d like to be, or perhaps you just need some guardrails to help direct you through the next few months, here’s a seven-point checklist to EOFY for the small-and-medium business owner.
1. Review recordkeeping processes
A non-negotiable aspect of EOFY means checking all reports and records are compliant with the Australian Tax Office (ATO).
The ATO requires businesses to keep records for at least five years, while at the same time more businesses are choosing to go paperless. This is something to consider when changing solutions providers or acquiring new technology solutions.
Tip: If you struggle with managing your expenses and keeping track of pesky receipts or invoices, you can use MYOB Capture App to snap a photo of invoices or receipts and have them automatically uploaded to your accounting software via the In Tray. This also makes it much easier to work with your accountant to maximise any relevant deductions.
Have your accountant review your automatic bank rules and the GST codes assigned to the Profit and Loss and Balance Sheet items to ensure you are lodging accurate Business Activity Statements (BAS). You will also want to make sure you’re on top of Taxable Payments Annual Reports (TPAR), Single Touch Payroll (STP) and more, as detailed further on.
2. Check your Business Activity Statements
BAS are designed to help you stay on top of your business taxes on a regular basis and, as such, this is the first key area of concern to tick off your EOFY list.
Make sure your BAS lodgements are accurate and up-to-date. If not, attend to your lodgements and arrange an ATO payment plan where necessary to help get you back up to speed in the next six months or so.
3. Prepare a Taxable Payments Annual Report (if relevant)
Taxable Payments Annual Report (TPAR) is a key ATO reporting requirement for many organisations that make payments to contractors or subcontractors.
In recent times, the Government has expanded the list of industry sectors that are required to lodge a TPAR via the Taxable Payments Reporting System (TPRS). Currently, that list includes:
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Building and construction
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Government grant providers
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Courier services
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Cleaning services
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Road freight
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IT services
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Security services
Tip: A TPAR must be lodged by 28 August each year and you can find out more about them via the ATO website.
4. Finalise payroll and super obligations
When it comes to reporting payroll tax and super, employers must use Single Touch Payroll (STP) to automatically deliver this information to the ATO.
A recent expansion of STP, known as STP Phase 2, sees employers delivering even more information to government agencies in this way. Given the mandatory start date for Phase 2 reporting is 1 January 2022, be sure to triple check your STP reporting is up to scratch.
Reconcile your payroll and get ready to provide 2022 Income Statements to your employees, making sure that salary sacrifice superannuation contributions (RESC) and certain reportable fringe benefits are being handled correctly.
Your super guarantee (SG) contributions also need to be accurate and up-to-date – your June SG is due 28 July 2022. If you have prior quarterly payments outstanding, contact your accountant or bookkeeper for guidance as soon as possible.
You will have up until 14 July to ‘finalise’ your employees’ EOFY payroll information through your STP-enabled payroll software – but this can be finalised as soon as you have reconciled the information and are happy with its completeness and accuracy, so no need to hold off on this one.
Tip: Doing all of this correctly means employees will be able to access their income statement online via myGov under the employment tab. If your employees don’t have a myGov account and cannot create one, or do not have a registered agent, they can call the ATO on 13 28 61 and they will provide it. You certainly can provide a copy, but there’s no legal requirement to do so.
5. Taking stock: Inventory, assets and liabilities
If your business carries stock, the stocktake of inventory should be completed by 30 June 2022, so decide on a suitable date and get that marked in your diary. If you have adjusted stock quantities and identified spoilage in your inventory, this should be adjusted as at 30 June 2022 to ensure it is reflected in the 2021/22 accounts.
If your business has substantial plant and equipment and you maintain an asset register, review this register and record any adjustments including description, location, quantity and damage/obsolescence and provide it to your accountant or bookkeeper so that any changes are reflected in your 2021/22 accounts.
Tip: Other liabilities worth taking stock of include customer deposits, gift vouchers and laybys as all of these can have a significant impact on the value of a business’s holdings and may impact your ability to borrow or sell your business in the future.
6. Complete reconciliations for FY21/22
Reconciliation is a process whereby a business owner, manager or bookkeeper compares actual transactions against supporting documentation in order to identify discrepancies, errors or any potentially nefarious activities.
This is an important step in a business’s EOFY processes as it allows management to identify any particular problems before reporting to the ATO, and so giving enough time to adjust or rectify as required.
Review your Balance Sheet and Profit and Loss Statement to show you have completed the following tasks:
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Bank accounts, petty cash, credit cards, loans and HP/chattel mortgages (monthly repayments on loans for fleet vehicles) are reconciled
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Compare your Accountants Receivables and Payables Reports to amounts shown on the Balance Sheet to ensure none are ‘out of balance’
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GST and PAYG withholding accounts are reconciled to the June BAS
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Wages and superannuation in the Profit and Loss report are reconciled to the PAYG Payment Summaries
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Amounts in suspense have been allocated to the appropriate ledger account or, if unsure, complete a note in the memo to assist your accountant or bookkeeper determine the correct treatment
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Personal expenses have not been claimed as business expenses
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Material differences to the prior year can be properly explained
7. Prepare for FY22/23
Getting ahead at EOFY doesn’t mean focusing solely on closing out the current financial year, but also putting yourself in the best possible position to succeed in the next one and beyond.
With new tax legislation and an ever-changing economic environment in play, business and tax planning is more important than ever.
We’ve collated the following shortlist of items for you to plan for as you head towards Financial Year 2022/23.
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Superannuation changes – As of 1 July, the Superannuation Guarantee Contribution increases to 10.5 percent, which coincides with the removal of the $450 threshold for super. This means more employers are likely to be paying out more superannuation with each payrun from the beginning of the new financial year.
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National wage increase – Yet to be confirmed, the month of June often brings an announcement from Fair Work regarding any changes to pay and wages, so keep an ear out for any news from the Ombudsman.
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Reporting – As a result of the above along with any other changes you’ve identified coming down the pipe, now’s a good time to update Profit and Loss and cashflow budgets for the year ahead, taking the time to compare budgets versus actuals for this period and applying any forecasts to the next.
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Price changes – Based on your updated reports and related planning, it may be time to reconsider your prices or even your pricing model.
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Tax planning – With new incentives for digital purchases and skills training announced as part of the recent Federal Budget, there’s even more to discuss with your accountant regarding tax planning for the year ahead. Have this conversation as early as possible to make sure you’re in a better position with your taxes come year-end 22/23.
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Policies and financing – The EOFY period is also a good time for business decision makers to take stock of their access to finance, repayment terms as well as any other insurance or similar policies that are currently in place and attracting cost. If it’s been some time since you reviewed these, it may be time to shop around to see what other offers are available in the market.
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Software and systems – When was the last time you reviewed your business management platform? This includes all the systems and processes related to your core workflows, such as accounting, payroll and inventory. If you’re trying to get various different systems to talk to each other, you’re probably losing money as well as at risk of being non-compliant or compromising your security. Is FY22/23 the year you upgrade to an integrated business management platform?
Source: MYOB April 2022
Reproduced with the permission of MYOB. This article by Chris McComb was originally published at https://www.myob.com/au/blog/eofy-checklist-for-businesses-bookkeeping/
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