Business owners have many responsibilities at end of financial year. It can be a hectic time, but it can be a little easier if you have someone working with you to take the stress away. At end of financial year, a great bookkeeper is vital. If you are in Newcastle, Real Balance is the team you should call.
Great preparation is crucial to easing the stress.
A few important issues to consider at year end include the following
- Deductibility of Superannuation Payments
- Super Concessional Limits
- Superstream Compliance
Deductibility of Superannuation Expenses
To be entitled to claim a deduction for employee superannuation contributions for the year ending 30 June 2016, those contributions must be paid into the superannuation fund by 30 June 2016. You may need to allow a reasonable period of time to ensure those payments have been cleared by your bank and received by your superannuation fund prior to 30 June.
Superannuation Concessional Contribution Limit
Contributions paid into your superannuation fund are taxed at a concessional rate of 15%, up to a prescribed limit.
For employees under 50 years of age the limit is $30,000, for employees over 50 years of age, the concessional limit is $35,000.
Superannuation Guarantee rate from 1 July 2016
Superannuation Guarantee contributions rate will remain unchanged at 9.5% from 1 July 2016.
From 1 July 2016, small employers with fewer than 19 employees must be SuperStream compliant.
What this means is that you need to pay super contributions for your employees electronically (EFT or BPAY) and send the associated data electronically. This means you can make all your contributions in a single transaction, even if they’re going to multiple super funds. Larger employers should have been using SuperStream since 31 October 2015.
Prior to closing out your financial year, it is a great time to review your costs and determine what you may be able to do to assist your tax planning for the year. A few issues to look at include;
- Prepaid Expenses
- Employee Bonuses
- Bad Debts
- Stock on Hand
- Log Books
Prepayment of expenses and utilising them prior to year end is an effective way of reducing your taxable income. Some expenses that you may consider paying prior to 30 June are superannuation contributions, subscriptions/memberships, marketing expenses and interest expense on a deductible loan.
Seek specific advice on how you may be able to benefit from the prepayment of expenses.
A deduction may also be claimed from paying employee bonuses or commissions, that may ordinarily have been paid in the following month.
A deduction may be claimed for a debt that is owed to you by a customer, but is declared a bad debt prior to 30 June 2016. There are some criteria that assist to define when a debt is considered to be bad and entitles the debtor to write the debt off. Prior to writing off any bad debts be sure to seek specific professional advice.
Stock on Hand
Businesses that carry stock on hand that is ready for sale or stock that is held as a component in the manufacturing process, may conduct a stock take as at 30 June 2016. The purpose of the stock take is not only to calculate the value on stock that is on hand at 30 June, but also to identify obsolete or damaged items and to write them off accordingly. In reviewing your stock on hand and its value at 30 June, be sure to seek specific professional advice prior to finalising your stock take.
Small business entities, with a turnover of less than $2,000,000 may claim an immediate write –off for all asset purchases up to the value of $20,000. To qualify, the asset must be installed and ready to use by 30 June 2016.
For business with turnover above $2,000,000, the immediate write-off does not currently apply, but may change subject to the election result on 2 July 2016.
Maximising property depreciation is one way to ensure that you claim all depreciation that you are entitled to claim for that property and it’s fixtures and fittings. To assist with this contact a qualified Quantity Surveyor who specialises in Tax Depreciation consulting.
It is important to ensure that your log books are still current and not more than 5 years old. They should also reflect that the business-use percentage is still an accurate representation of your equipment usage.
PAYROLL & EMPLOYEES
- Increase to Award Pay Rates
- Changes to PAYG Tax Scales
- Payroll Tax Threshold
Award Wages to Increase from 1 July 2016
The Fair Work Commission has announced a 2.4% increase to Award wages. This increase comes into effect from 1 July 2016. You will need to ensure that all your pay rates are updated, ready for the first full pay period starting after 1 July 2016.
The minimum wage increases to $672.70 or $17.70 per hour.
The increase only applies to employees that get their pay rates from:
- the national minimum wage
- a modern award
- a registered agreement (in some cases).
- Changes to PAYG Tax Scales
It is anticipated, at the time of writing, that PAYG Tax Scales may change some time after 1 July 2016. This is subject to the result on the Federal election on 2 July and the passing of the May 2016 budget.
Cloud-based accounting systems like , Quickbooks Online, Xero & MYOB will automatically update changes to PAYG in its payroll module. If you are using desktop systems like MYOB or Quickbooks, you will need to be mindful of upgrading your payroll system.
Payroll Tax Threshold
For those employers that are approaching payroll tax wage threshold limits for the year ending 30 June 2016, you will need to monitor the payment of bonuses, commissions and other wage payments and be aware of whether you will need to register for payroll tax. You will also need to take into account wages that are paid in all states where you employ people in more than one state.
The payroll tax threshold in New South Wales for the year ending 30 June 2016 is $750,000 and the payroll tax rate is 5.45%.
TRUST DISTRIBUTIONS & ELECTIONS
If you are operating your business through a trust, be sure to contact your accountant and ensure that you satisfy all your compliance obligations.
Deferral of Income
A commonly used strategy to minimise tax or defer tax to the following year is to delay the earning of income. This may involve holding back the issuance of invoices until after 30 June 2016. Prior to holding back invoicing, consider what effect this may have on your cash flow.
Prior to deferring income or holding back invoicing ensure that you seek specific professional advice to ensure that it is suitable for your purposes.
This information is intended to provide business owners with general guidelines to consider prior to end of financial year and should not be seen as a substitute for professional financial advice that relates to your specific needs and requirements. Consult with your accountant and seek specific professional advice for your end of financial year planning.
Our client’s tell us that partnering with Real Balance gives them;
- feeling of being in control of their business;
- peace of mind of knowing how their business is performing;
- confidence of working with professional financial control;
- security of knowing you are never alone with your numbers.
Call us now to find how we can help take the stress out of end of financial year. For more information visit www.realbalance.com.au or call us on 4962 3387.