As the financial year draws to a close, business owners can still take advantage of any benefits that could be available and ensure the business is in good shape for closing one financial year and entering another. Here are some specific matters to be considered in time for 30th June 2019.
Writing-off eligible small business assets purchased and utilised before 30 June 2019
If the business has purchased an eligible asset item costing up to $20,000 between 1st July 2018 and 28th January 2019; up to $25,000 between 28th January 2019 and 2nd April 2019; and up to $30,000 between 2nd April 2019 and 30th June 2019, the purchase can be deducted immediately if the business meets the requirements under the Act. These write-offs can be claimed multiple times but any items deducted under the scheme in each period must be in use, or ready for use, by 7.30pm on 28th January 2019 (<$20,000); 7.30pm ADST on 2nd April 2019 (<$25,000); or 7.30pm AEST on 30th June 2019 (<$30,000) for the financial year 2018-2019.
Some business owners are inclined to buy more items just before the end of the financial year, particularly when the objective is to reduce profit which might otherwise be taxable. Retailers tend to promote EOFY as a seasonal shopping spree for businesses, however, it makes more sense to purchase assets which contribute towards the business by improving productivity and profitability, enhancing quality, saving costs, reducing risks, etc.
Common examples of purchases made under the small business asset write-off scheme include vehicles, computers, business equipment, plant and machinery, security systems – “allowing a cafe to get a new fridge or grill, a plumber to buy new tools or a courier a new van,” in the words of the Treasurer when announcing the extension of the scheme in the May 2019 Budget to include also businesses with turnover between $10million and $50million (conditions apply). The $30k instant asset write-off for business will remain in effect until at least 30th June 2020.
It’s important to note that if the purchased asset has a personal-use component – as typically exists with a company car, for example – then the deduction will be proportional, relative to the amount of personal use. For specific advice on the eligibility of any type of business asset purchase or how to account for any personal use of the business asset, talk to Geoff Morris at Billings + Ellis.
Ensuring the business is ready for Single Touch Payroll (STP) effective 1 July 2019
The requirement for Single Touch Payroll (STP) reporting for employers with 19 or fewer employees is effective from 1st July 2019. Following the introduction of Single Touch Payroll, businesses will no longer be required to complete payment summaries at the end of the financial year. Single Touch Payroll is a simpler way to report employees’ payroll information. Payments such as salary withholding, PAYG withholding tax, and superannuation are reported directly to the ATO via the payroll software at the same time as employees are paid.
If you’ve missed the reminders about setting up Single Touch Payroll before 30th June 2019, or you’re not sure about how to handle end-of-year payroll procedures, call Billings + Ellis and ask for Geoff Morris.
Checking inboxes and shoeboxes for expense receipts
Employees with business-related personal expenses being routinely reimbursed by the business could be more prompt with validating and submitting their expense claims for reimbursement. It’s often business owners, particularly sole traders, tending to run various expenses through the business without necessarily providing the accounting system with receipts along the way; and conversely forgetting to claim business-related personal expenditure and proportions thereof as business-related expenses. EOFY is the time to check drawers, shoeboxes, inboxes, consoles, bags, and luggage compartments for any receipts that escaped from being processed in the accounting system during the year.
Stocktaking and getting the inventory account sorted
Some businesses are relatively easy to roll over at the end of any financial year, with an inventory comprising little more than general consumables. Others take much more work to finalise, as in businesses like retail and manufacturing. Inventory items including products and materials for manufacturing need to be quantified and valued by doing a stocktake as of 30th June 2019.
Maximising allowable business and personal tax deductions
For some businesses, it could be advantageous to delay all or part of pending invoicing until 1st July, or to bring forward the payment of some expenses to June – such as the June quarter superannuation, and perhaps 12 months’ worth of interest or rent, if possible. An increase to super contributions up to the $25,000 limit could also be considered.
Determining business and accounting improvements for 2019-2020
At the end of any financial year, it’s also a good time to reflect on the results of the year just gone and make plans to improve in the year ahead. For example, you might be receiving some bills that offer a fast-payment discount but have failed to obtain the discount due to the bill being paid routinely at the end of the prescribed payment run. There could be subscriptions to products or retainers for services that are no longer relevant. There could be products or services available – such as a POS system integrated with Xero for retail businesses – that would make great improvements if the business could budget for implementation in the financial year 2019-2020.
Geoff Morris, Graham Morris, and the team of accountants at Billings + Ellis have immense experience in small business accounting and working with business owners to improve overall business efficiency and profitability. From Xero accounting through to business advice, personal taxation. SMSF, and even cloud accounting integrations (POS systems for retail, hospitality, and services; apps to assist with automating AP data entry; time-billing systems, and more) at Billings + Ellis we’re the ‘go-to guys’ for go-ahead business people with accounting and taxation needs.