Published on 16/07/2021 by Any Business.Com.Au

How do I make sense of a very different EOFY?

A Guide for Small Business Owners

It's not a surprise to anyone when we say that this has been a confusing, complicated and at times extraordinarily difficult last financial year for the small business sector.

Changed business conditions due to trading restrictions, access to government payments and various phases of lockdown have meant small businesses have experienced a financial year like no other.

For many, end of year figures may include pandemic or disaster recovery grants and JobKeeper payments which, along with the usual tasks of book keeping, tax accounting and new financial year planning, could make for an overwhelming time trying to balance the books.

This blog is designed to help clear some of the confusion around EOFY 20-21 for small business.

JobKeeper Payments

For businesses that remained on JobKeeper, all monthly business declarations for JobKeeper fortnights should have been completed by mid-April to receive final JobKeeper payments.

According to the ATO, all JobKeeper payments are assessable as ordinary income of each business eligible to receive the payments and should be declared as income in tax returns.

The normal rules for deductibility apply for the amounts your business pays to its employees, where the JobKeeper payment subsidises those amounts.

Instant Asset Tax Write-Offs

There has also been changes to how businesses can write off assets.

For example, in last year's budget, the federal government extended the instant asset write-off scheme.

For assets purchased by December 31, 2020, and first used between March 12 2020 and June 30, 2021, the instant asset write-off threshold amount increased to $150,000 and the scheme was extended to businesses with an aggregated turnover of less than $500 million.

The threshold amount is up from $30,000, and the government previously capped business turnover at $50 million.

The instant asset write-off scheme has now effectively been replaced by temporary full expensing, where businesses with a turnover of less than $5 billion can immediately deduct the business portion of the cost of eligible new depreciating assets.

With a 12-month extension announced in the most recent budget, this can now be utilised for assets first used or installed between October 6, 2020, and June 30, 2023.

The devil is in the detail, so it is worth seeking professional advice to check if a purchase is eligible, as there are some exceptions, as well as simplified depreciation rules for small businesses.

Coupled with these tax changes, each state government has also offered COVID-led tax relief for employers, from payroll tax relief to small business grants and loans, which will need addressing during tax time.

If your business has been a recipient of a grant, JobKeeper or other payment for COVID-19, then you must retain all your records and provide them, along with your standard assessable income details, to your accountant.

Given the likelihood many other businesses will need professional help, you should aim to have as much of it prepared as possible in advance.

EOFY Checklist for Small Business

1. Check what record keeping and other tasks to complete

Some of the yearly tasks you need to do as a small business owner may include:

• a summary of income and expenses in a profit and loss statement
• conducting a stocktake
• summaries of your record of debtors and creditors
• collating records of asset purchases or expenditure on improvements (to calculate depreciation expense claims and for capital gains tax)
• completing and lodging your income tax returns
• lodging yearly reports or returns for:

• pay as you go (PAYG) withholding including finalising income statements for single touch payroll
• fringe benefits tax (FBT)
• goods and services tax (GST)
• the taxable payments reporting system

• meeting superannuation requirements
• making digital copies of any paper records and backing them up

If in doubt, contact your accountant or consult the Australian Tax Office website.

2. Find out what tax deductions and concessions you can claim

You can claim deductions for most business expenses, as long as they directly relate to earning your income. For example, you may be able to claim deductions if your business:

• has set up a website
• has motor vehicle expenses
• uses diesel fuel
• operates at home
• has travel expenses
• uses machinery, tools or computers

You must have records to prove the expenses that you claim as business deductions.

3. Check your tax agent is registered

Check your tax agent is registered with the Tax Practitioners Board (TPB).

There are two ways you can check:

1. Search the TPB register.
2. Look for the registered tax practitioner symbol on their website, stationery, brochures or business cards. The registered tax practitioner symbol includes the type of registration and their individual registration number.

4. Keep up-to-date with tax changes

There may be tax changes each year that you need to be aware of, some of which we've detailed above. These might include changes in tax law and deductions or concessions for small business.Your tax professional can help you understand any changes.

5. Be wary of tax refund scams

There are a number of scams that target small business around tax time. Common tax time scams include:

• tax refund scams – the scammer claims you've overpaid your taxes and are eligible for a refund. To get this refund, they claim that you need to pay a fee for administration or transfer costs.
• tax owed scams – the scammer claims you've underpaid your tax and need to repay it immediately. In order to make this payment, they ask for your credit or debit card details, or ask you to send money through a money transfer, or they may ask you to purchase iTunes cards and send them the details of the cards.

6. Review your finances

Review your finances with your accountant or bookkeeper.

Look at whether you met your targets and what you can do differently next financial year.

Create a cash flow forecast to:

• manage any potential shortfalls
• ensure you can still pay your staff and suppliers

7. Review your business and marketing plans

Take time to set yourself up for the year ahead. Regularly reviewing and updating your plans will help you to:

• remember your goals and priorities
• assess whether your strategies are working
• adapt to any changes in your environment
• make the most of new opportunities as they come your way
• prioritise and maximise your effort (work smarter, not harder)

8. Review your business structure

As your business grows and expands, you may decide to change your business structure, or to restructure your business. The compliance and taxation regulations differ depending on your business structure.

9. Check your insurances

If your circumstances change, you may need to update your level of cover.

Read the product disclosure statements (PDS) for your insurance policies carefully. Don't assume you're covered.

A broker will work with your business to make sure you get the best deal from an insurance company.

10. Backup and secure your files

Backup and store your business information in a secure off-site location. Include:

• registrations
• financial information
• customer data

If there was any year to consider using the service of a professional tax or financial adviser, then the 2020-21 tax year is definitely the one.

If your books don't look as healthy as you would like and you're worried about your ability to remain solvent into the future, it's also the right time to approach an expert to guide you through the best way forward.

* Checklist items originally published on the business.gov.au website

AnyBusiness.com.au

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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