Year-end tax procedures for businesses

June 16, 2010, 10:34 am Joe Kaleb KBB

Last minute strategies to reduce tax bills, streamline accounting and forward plan for the new financial year.

With the end of the financial year rapidly approaching, business owners need to focus on last minute strategies to reduce their tax bills, streamline their accounting and bookkeeping procedures and forward plan for the new financial year.
Tax planning strategies

- Topping up super contributions. Note that employer super guarantee contributions are included in the $25,000 and $50,000 concessional deduction caps.  

- Delay invoicing customers or receipt of income until 1 July.

- Realise capital losses to offset against capital gains made during the year.

- A small business with a turnover under $2 million can claim an immediate deduction for the cost of depreciable assets costing less than $1,000 and certain prepayments (e.g. lease and rent expenses).

- Dispose of slow-moving stock and write-off obsolete stock before 30 June.

- Write off bad debts and claiming back the GST credits where the debt has been outstanding for more than 12 months.  

- Review PAYG instalment obligations and consider varying the instalment for the June 2010 quarter where the estimate of business income tax payable for the year is less than the instalments raised by the ATO.

Accounting & bookkeeping procedures

- Ensure that BAS lodgements and super guarantee contributions are up-to-date.

- Where the business is behind on its tax and BAS payments, ensure that payment arrangements have been entered into with the ATO and are complied with.

- Report salary sacrifice contributions on employee’s 2010 PAYG Payment Summaries.

- Back up the data file prior to rollover and ensure compliance with record-keeping requirements. The ATO requires businesses to keep records for at least five years.

- Review the GST codes for profit & loss and balance sheet accounts for correctness.   

- Having proper cut-off procedures to ensure matching of income and expenses. For example, ensure suppliers provide the relevant invoices for all purchases and expenses for the period up to the end of June. Also identify work in progress or sales not yet invoiced and raise the relevant invoices for the period up to 30 June.   

- Plan to complete stock takes of inventory. Any unders/overs of stock quantities and spoilage identified from the stock take process should then be adjusted in the stock module by 30 June 2010 and thereby reflected in the financial statements.

- Plan to complete stock takes of fixed assets. Any adjustments required to the assets register identified in the assets stock take for issues including description, location, quantity and damage/obsolescence needs to be made in the assets module by 30 June 2010 and thereby reflected in the financial statements.

Review the balance sheet and profit & loss items to confirm:

- Bank accounts and loans are reconciled.

- Receivables and Payables subsidiary ledgers are reconciled to the general ledger.

- GST accounts and PAYG withholding are reconciled to the business activity statements.

- Wages in the profit & loss is reconciled to the PAYG Payment Summaries.

- Capital items such as plant & equipment purchases have not been expensed as repairs.

- Amounts in suspense have been allocated to the appropriate account.  

- Private expenses are not included in the profit & loss unless fringe benefits tax has been paid.  

- Material differences to the prior year can be explained.

-Having the data file and paperwork up-to-date and accurate before seeing your accountant not only makes life easier but saves time and money. 

Reviewing performance of service providers

Now is a good time for business owners to review the performance of their accountant, financial planner, bookkeeper and other service providers during the past 12 months and consider changing to someone else if the services are not up to scratch. 

You can start by asking for a recommendation from a business colleague and also clicking on the Australianbiz site for the factors to consider when selecting an accountant and searching the extensive directory of Australian accounting firms.  

Planning for the 2010/11 year

The steps that should be undertaken to improve on the performance of the previous year include:

- Preparing/updating the business plan to provide some forward direction for the business.  

- Update the budgets for the next 12 months and compare actual to budget. Arrange credit facilities with the bank where cash shortages are forecast.

- Review credit terms with suppliers and customers and make changes if required.

- Review insurances to ensure adequate level of coverage.

- Reduce costs in areas identified as excessive in the current year.

- Implement new internal control systems to address weaknesses identified.