COVID-19 has caused uncertainty, rapid changes and setbacks. For small businesses, governments have introduced a large number of incentives to help them keep running which will impact your tax return applications. Now more than ever it is key to prepare for EOFY.
There are a number of things you can do to get your affairs in order, so you are prepared.
It can be time consuming and tedious to do. But, it is important you get your paperwork completed and organised ASAP. Make sure you have completed records for receipts, expenses, tax payments made, and receivables. Ensure that all these records are detailed and have no gaps.
Cloud based technology is a great way to record your paperwork. In the next financial year, ensure you record receipts and transactions into a digital cloud based platform such as MYOB or Xero every month. This will help you stay on top.
Any outstanding payments should be made as soon as possible, and these transactions should be recorded. Reconciliation of paperwork once you have finished records is vital in ensuring that everything is accurate.
2. Audit your software
Are you still using excel to record all your payments and paperwork? Do you have manual records? Are you unable to keep track of everything using your current software? What are the advantages and what are the limitations?
It is key to take time to analyse the software you use and make sure it is still relevant for your business. Don’t leave this till next week. Get on it now! The last thing you want to do is scramble getting your accounting softwares organised in two weeks’ time.
There is a range of cloud based software suitable to small business reporting requirements such as Xero, Sage, Intuit Quickbooks & Freshbooks. It's important to pick the software that best meets your business needs.
Automated tools are there to help make accounting easier. Use them! Streamlining processes and automation will help filling out a tax return much easier.
3. Keep up to date with regulation changes
The past few months have seen many changes. COVID-19 relief packages will impact your EOFY statements and tax return. The government, banks and other providers have introduced relief assistance. We've seen the government increase the instant asset tax write-off, Jobkeeper payments, early release of your super, and boosted cash flow. Banks and other service providers have offered repayment pauses. Research and understand the tax concessions available to small businesses that may be of benefit. For example, small business income tax offset and small business CGT concessions.
These measures will impact your tax return and it is key you are aware of all the benefits you have used so no information is missed. Refer to knowledge hubs such as Finder’s small business tax guide for in-depth information regarding compliance requirements, lodgement due dates and what to keep in mind when filling your tax return.
4. Manage deductions
Saving money is key. As a small business owner, you want to make sure that you are saving as much as possible, especially during a recession.
I believe you should never spend money just to make a deduction when cash flow is your number one priority. This frugal habit will also ensure that you are always conscious about what you’re spending and if you really need it.
But if you do need to invest in equipment or assets now is a good time. Due to COVID-19, the government increased the instant asset write-off to $150,000 for businesses with an aggregated turnover of up to $500 million. Have an understanding of deductible expenses. Write down a list of everything you can claim and categorise it based on the amount it will save you.
5. Get help
You don’t have to do it alone. Remember, EOFY and business activity statements can take time to organise. When you’re a small business owner, being frugal is always key. However, when it comes to finances it can be useful to get help, especially if finance isn’t your strong suit. Make use of the free help and support available to small businesses such as ATO webinars and workshops. This can help reduce the chance of errors and know about regulations and payments.
It is key you start preparing right now and take extra care in completing each task. It’s a long process but one that you can’t avoid. Buckle down, get organised, write yourself a list of things you need to do, use guides and save yourself time when filing your tax return.
Fred Schebesta is the founder of Finder, and a Small Business First Champion.