EOFY Checklist for Small Businesses

1. Make sure your paperwork is up to date

There’s a lot of paperwork business owners need to navigate at EOFY. Starting with a reconciliation will help to identify any missing documents, and streamline the rest of your processes. 

At a minimum, you should check you have up-to-date records of:

• sales receipts
• invoices and receipts for purchases made using business funds
• payments to employees and contractors
• all records concerning tax returns, activity statements, and employee super contributions
• GST returns
• JobKeeper paperwork

2. Find out what tax deductions you can claim

Running your own business can be expensive. Luckily, most money that is spent carrying on or protecting your business is tax deductible. 

It makes good business sense to familiarise yourself with the specific deductions available to your industry, and claim what you can within the scope of tax law. 

EOFY is a good time to give all your business’s equipment a once-over, in case repairs or replacements are needed. Spend some time checking your tools, whether that’s your restaurant’s ovens, your EFTPOS machines, your retail display cases, your hairdresser’s scissors — whatever your business relies on to turn a profit. If maintenance or replacement is required, it might be a good idea to organise and pay for those costs before 30 June. 

3. Finalise payroll

If you employ staff, you’ll need to complete your year end reporting to the ATO. 

Single Touch Payroll (STP) has streamlined the way employers report wages, superannuation and PAYG to the ATO. If you use STP, you no longer need to lodge an annual payment summary report; the ATO uses the automated reports you send throughout the financial year. 

You have until 14 July 2021 to finalise your declaration to the ATO, stating that you have fully complied with the reporting requirements. If you require further information on STP, visit the ATO website. 

The internal payroll matters that you need to reconcile include:

• any unprocessed leave
• outstanding invoices from contractors or freelancers
• superannuation
• long-service entitlements
• any other payroll issues with financial commitments attached, such as bonuses

4. Carry out a stocktake

Businesses that buy or sell stock will need to perform an EOFY stocktake, detailing stock levels — as well as the value of that stock — as at 30 June 2021. Any lost or damaged stock can be written off. 

Although you’re not required to perform a stocktake if you can reasonably estimate the value of your small business’s inventory and the figure hasn't fluctuated more than $5,000 in the last 12 months, it’s a good opportunity to clear out any out-dated stock as well as review your ordering processes. If there’s surplus, consider making adjustments next financial year. 

Those businesses providing professional services must carry out a similar task, accounting for work-in-progress. Now’s the time to identify any resources being held up by individual projects, as well as any clients that aren’t paying their bills on time for ongoing work.  

5. Write off bad debts

If you account for your income on an accruals basis, you may be able to claim back the tax you’ve already paid on a bad debt. 

The first step is reviewing your invoices for outstanding receivables. You might like to first consider offering clients with outstanding debts a small discount on the amount owed, if they pay before 30 June. However, failing that, you can receive a refund on the GST paid by including the bad debt in your Business Activity Statement or annual GST return. You should, of course, document all efforts made to recover what is owed. 

6. Process superannuation payments

Businesses with employees paid $450 or more per calendar month are required to pay a super guarantee on top of employee wages. 

It pays to get ahead of your superannuation obligations. These contributions aren’t tax deductible until they’ve been paid. So, if you pay employee super contributions prior to 30 June 2021, you’ll be able to claim a tax deduction in this year’s income tax return — rather than waiting till next year. 

7. Fix up your fixed assets

It’s time to account for the depreciation of your business’s assets. Put together a comprehensive list, including dates of purchase, price, and costs involved in the maintenance or repair of those assets.  Then, work with your advisor to determine which assets are depreciable, and for how long. Desktop computers, for example, are only depreciable for four years. 

If you’ve taken advantage of the instant asset write-off scheme in the last 12 months, you can claim the business portion of that asset’s use in your tax return. The Federal Government increased the threshold from $30,000 to $150,000, per asset acquired, as part of its Coronavirus Stimulus Package. There are, however, caveats regarding turnover and installation or first use dates.

This scheme has been extended by a measure called Temporary Full Expensing, which covers the period from 7:30pm AEDT on 6 October 2020 until 30 June 2023. The measures allow for an immediate deduction for both new and second-hand assets, provided those assets are eligible for write-off. The write-off is available to businesses with an aggregated turnover under $5 billion. 

Find further details about the instant asset write-off on the ATO website. 

8. Run financial reports

Your profit and loss statement, balance sheet and cash flow sheet are three of the most important reports you should be running every EOFY. Keeping these reports up to date will give you oversight into the financial health of your business, and provide you with the insight necessary to make budget and planning decisions. 

Once these are complete, you may want to revisit your business plan. Your financial advisor can use these reports to provide advice to help grow your business in the upcoming year. What are your goals for the next 12 months? What areas do you want to improve or change? This is also an ideal time to establish a new set of financial performance goals. Were you able to meet last financial year’s targets? What do you want to achieve? 

Update your budgets for the next 12 months accordingly.

9. Review insurance policies

EOFY is an ideal time to review your insurance policies. Check that any policies you hold still provide an appropriate level of cover, both for yourself and your business, and compare insurance providers to ensure you’re getting the best deal.

The insurance required by both yourself and your business will depend on the type of business, its structure, size, and the industry it operates in. An insurance broker can help guide you through the process.

10. Back up and secure your files

Now is a good time to make a digital copy of all your paper files, and file them appropriately. Make sure to back up your files on a hard drive, separate from your computer. 

The ATO requires businesses to keep records for a minimum of five years, and system failures are not an excuse for noncompliance. 

11. Calendarise all due dates

Each year, you are required to lodge a tax return. The date by which you must lodge your tax return depends on your business structure.

• Sole traders lodging their own tax return can do so from 1 July to 31 October each financial year. Sole traders lodging their tax return through a registered tax agent should contact their agent for more information.
• For businesses operating as a partnership, tax returns can be lodged from 1 July to 31 October each financial year. Again, however, if a registered tax agent is involved they should be contacted for more information.
• Company tax returns lodgement dates vary. The majority of company tax returns will be due 28 February each financial year, however we recommend you check the ATO website for your specific date.

If your business received payments under the JobKeeper scheme, this should be declared as part of the ordinary income of your business. The normal deduction rules apply for the wages paid to employees, where the JobKeeper payment subsidises those amounts.

There are a number of other documents you are required to submit to the ATO. Avoid unnecessary penalties by marketing the due dates in your calendar, and getting ahead of the paperwork early. 

12. Review your finances

It’s best to work with a professional accountant and use this time to go over your past year’s growth and expenses, as well as plan for the year ahead. 

If you’ve identified cash flow as an issue, sit down and consider where the shortfalls are occurring so you can pay your staff and suppliers on time, while growing your business, without going into debt. 

There may be some easy ways to improve your business's finances that you haven’t thought of, such as recovering debt, rearranging your expenses, selling unneeded assets, consolidating debt, and speeding up the rate at which your takings are available for spending by switching EFTPOS terminal providers. 

While some of these tasks may seem monotonous, they are essential boxes to tick at this time of year so that you can hit the next financial year running. Once you’ve worked your way through the above checklist, use the momentum to get ahead for next year.

Tips to make next EOFY easier

• The ATO has built an app, myDeductions, for sole traders to easily record income, expenses and potential deductions. It’s freely available on the ATO website. 
• EOFY is prime time for tax refund scams. Keep your business safe by familiarising yourself with how cyber threats work, and remain vigilant. 
• If you haven’t already done so, consider separating your personal bank account from your business bank account. Capturing all business expenses in one place will make every EOFY simpler, and make it easier to manage your cash flow. 
• Mark 1 July 2022 in your calendar. The superannuation guarantee will increase to 10.5% on this date.

To fully prepare your business for the end of the financial year, schedule time to speak with your accountant or financial advisor. Please note this article is for educational purposes only and does not constitute advice.