End Of Financial Year Planning 2020

13 May End Of Financial Year Planning 2020

4 min read

The year is flying past and seems to speed up exponentially each year as I get older.  A friend of mine told me once a catchy saying that reminds me to plan ahead to make things work smoothly, which she donned the “7 P Principle”, which went something like Prior Preparation and Planning Prevents Poor Performance.  There was another P in there but I will let you work that one out!  However, the sentiment is true and applies in all avenues of life from tomorrow night’s dinner to end of financial year planning. 

June is upon us – one month to go before the tax clock / calendar flips over again.  Not to mention that we are all dealing with the outflow from COVID – 19 in some way or other.  Taking all of that into consideration, it is wise to spend some time planning for tax time so that you a are in a good position to head to your qualified Tax Accountant when July 1 comes around. 

Whether you have a small business, are investors or an individual with an investment property or a PAYG wage earner a bit of preparation before the end of the financial year will help provide a smooth transition to the new FY.  The following are good points to note and can help prompt appropriate changes if needed. 

The following is general advice and shouldn’t be relied on as you need to seek specific advice for your situation with your financial advisor before acting on it to ensure that it is appropriate for your circumstances.

1. Income. 
   You are assessed for tax purposes on the basis of when your income is derived. If you are on cash basis this is when it is received and if on an accruals basis is when the income is earned i.e. when the work is completed.  If you can defer any work to the new financial year then you will be taxed on it in the 2021 year. 
   
2. Debtors
   If you are on an accruals basis for accounting then this point is relevant to you.  It is a good time to clean up your debtors list and see if there any on your books that are not collectable, ones that are way past the due date.  Of course try and collect outstanding amounts that are collectable but for those that aren’t then it is an appropriate time to write them off and claim the deduction for them in this financial year.  Also, if registered for GST, don’t forget about the GST that you have remitted to the ATO on those bad debts and should be included in your BAS for the end of the financial year. 
   
3. Prepaying Business Expenses
   This can be of use at the end of a financial year as often suppliers will give you a discount if you pay quickly or in advance.  Another advantage of prepaying expenses is that it gives you the certainty of the price of what you are paying for and avoiding the implications of any price rise that may occur in the new financial year.  Usual expenses that can be prepaid include interest on borrowings, advertising, rent, insurance premiums, business travel expenses and subscriptions.  For individuals if you are studying that is related to your work – so would be deductible – what about paying the course costs now to have the deduction in this financial year?
   
4.  COVID – 19 Support for Business and Employers 
   COVID – 19 has wreaked havoc on all of us.  In an attempt to keep businesses afloat and people in jobs the Government has introduced a swathe of measures to help
   businesses continue to run and employ people. 
   
   Some of the measures implemented include the
   • JobKeeper scheme – the time to enrol for the first JobKeeper period has been extended until 31 May 2020. 
   • Cash flow boost for employers affected by COVID – 19 – will receive between $20 to $100k in cash flow boost delivered through credits in the activity statement system when businesses lodge their activity statements. 
   • Instant asset Write – Off  for eligible businesses  from 12 March 2020 until 30 June 2020,
     •  the instant asset write-off:threshold is $150,000 (up from $30,000)
     • eligibility range covers businesses with an aggregated turnover of less than $500 million (up from $50 million)
       
       From 1 July 2020, the instant asset write-off will only be available for small businesses with a turnover of less than $10 million and the threshold will be $1,000.
       
5. Trading Stock / Inventory
   If you hold stock in your business then 30 June is the time to do the stock take.  This is the time to write off stock that is out of date or obsolete – which will have a market selling value of nil.  A lower value of closing stock will result in a lower tax bill
   
6. Write off Assets
   Any assets that are out of date that you are carrying on your books may need to be written off.  For example old IT equipment that is no longer used. 
   
7. Super Contributions
   It is a good time to review that super contributions are up to date – when super is paid late then it is not tax deductible.  If you have some spare funds you could also review your super contributions to get up to the concessional contributions cap – 15% tax rate.  The concessional contributions cap is $25,000 for all individuals regardless of age.
   
   Checkout the ATO website with info re contributions. Source : ATO Super rates and thresholds
   
   Good luck preparing for the end of the Financial Year and remember the 7P Principle!
   
   Other useful links
   
   ATO Rental expenses you can claim
   https://www.ato.gov.au/General/Property/Residential-rental-properties/Rental-expenses-you-can-claim-now
   
   ATO Superannuation Rates and thresholds
   https://www.ato.gov.au/Rates/Key-superannuation-rates-and-thresholds/?page=3
   
   Or Essential End of Financial Year Tasks
   https://www.business.gov.au/Finance/Accounting/Essential-tasks-at-end-of-financial-year-EOFY
   
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