Preparing for the End of Financial Year: A Guide for SMEs

Vital Addition

May 29, 2024

As we approach the end of the financial year (EOFY), small and medium-sized enterprises (SMEs) need to be hyper-vigilant in their financial management and planning to ensure operational success. The Australian Taxation Office (ATO) has highlighted three common errors taxpayers should avoid during Tax Time 2024 to ensure smooth and accurate tax filings. These include:

  • Incorrect Claims for Work-Related Expenses: The ATO notes that many errors involve personal expenses claimed as work-related.
  • Inflated Claims for Rental Properties: Overstating expenses or understating rental income remains a concern.
  • Omission of Income: All income, including part-time or temporary engagements, must be reported.

To help you navigate tax time effectively, the team at Vital Addition has created this guide to help you prepare for EOFY.

Accurately Claim Work-Related Expenses 

For small and medium enterprises (SMEs), accurately reporting work-related expenses is especially critical. In 2023, over 8 million people claimed work-related deductions, with a significant portion relating to home office expenses. The ATO has revised the fixed rate method for calculating home office deductions, now requiring more detailed records to substantiate claims, including documentation of actual hours worked from home and additional running costs incurred.

The three golden rules for deductions are:

  • You must have spent the money yourself without reimbursement.
  • The expense should be directly related to earning your income.
  • You must have a record, typically a receipt, to prove the expense.

Key Work-Related Deductions to Consider:

  • Depreciable Assets: If you purchased assets like laptops during the year, these are deductible.
  • Professional Resources: Costs associated with professional journals, magazines, websites, memberships or subscriptions to professional groups.
  • Educational and Development Expenses: Expenses for courses and seminars that enhance your professional skills are deductible.
  • Communication Expenses: This includes costs for mobile phone usage, internet access, and other home office expenses.
  • Transportation: If you use a vehicle for work, keep a detailed record of expenses and mileage for work trips, as well as logs for servicing and maintenance.
  • Charitable Donations: Keep receipts for any donations of $2 or more to registered charities.
  • Investment Expenses: Costs paid towards earning investment income, such as financial advisor fees and margin loans.
  • Income Protection Insurance: Premiums paid for income protection insurance are also deductible.

Consider Paying Superannuation Early 

Details of your employees’ superannuation contributions need to be well-documented and finalised by June 30 to ensure they are tax-deductible. Employers can claim income tax deductions for Superannuation Guarantee (SG) contributions made to a superannuation fund on behalf of their employees, provided certain conditions are met. 

To improve your tax position for the current financial year, consider advancing the June quarter SG contributions to before July 1. Typically, these contributions are not due until July 28, but making them earlier can result in a tax benefit for the current year, offering an effective strategy to reduce taxable income.

Ensure BAS and PAYG Summaries are Up to Date 

If your business is required to file quarterly Business Activity Statements (BAS), keep in mind final submission for the fiscal year is due by the end of August. This provides you approximately four weeks post-EOFY to finalise and organise your records.

For businesses with employees and/or contractors, ensure you have copies of all your PAYG summaries for employees ready for review. Ensure you distribute your employees’ end-of-year PAYG summaries by the mandatory deadline of July 14. Use this as an opportunity to review your payroll totals to confirm your transactions match the figures on your payroll register. This helps to maintain compliance and prepares your workforce for their own tax submissions. 

Budgeting and Planning for the Next Fiscal Year

Leverage the data and insights gained from the current financial year to do some strategic financial management and planning for the upcoming year. Set achievable goals and outline strategies to enhance business performance and growth.

If you use accounting software, ensure that all transactions and accounts have been reconciled and that any personal payments are included. Grant your accountant access to this software to review your files and prepare your tax returns effectively.

Consult With Your Accountant

It’s important to remember that every SME is unique. If you want to get on top of your financial management ahead of EOFY, you should organise a detailed discussion with your accountant. Review your financial preparations and explore any specific requirements or strategies that may benefit your business type and industry.

Need Help Preparing for EOFY?

Effective preparation and strategic planning are key to navigating the complexities of EOFY, and empowering your business to thrive. ​By adhering to this guide, you can ensure a smooth transition into the new financial year, setting a solid foundation for sustained success and compliance. 

If you’re seeking expert advice to optimise your tax strategies and enhance your financial management, consider reaching out to Vital Addition. Our professional taxation services are designed to support business leaders through everyday challenges, from high-level tax advice to maintaining exceptional accounting records. Whatever your industry, we provide tailored support to ensure you meet your financial goals.

About Our Blog

We provide access to sound accounting, wealth and financial advice that is fresh thinking, honest and reliable. We see ourselves as a vital addition to people and businesses by giving them the strength in numbers they need to reach their business and financial goals.

Learn how our strength in numbers can support your business