The end of the Financial Year (EOFY) is when many people scramble to get their financial affairs in order. If you’re one of them. This post will provide some tips to help you prepare for EOFY.
We’ll also cover some of the most important things to remember during this year. So, if you’re looking to get your finances in check, read on!
Most people dread the end of the financial year (EOFY), but with a bit of organisation and preparation, it doesn’t have to be a stressful time. Here are some tips to help you get organised and make the most of EOFY.Â
The end of the financial year is quickly approaching, and if you’re like most people, you’re probably scrambling to get your finances in order. Here are a few tips to help you prepare for EOFY. But, first, make sure you have a plan.
Figure out your goals and how you’re going to achieve them. Second, get organised. Create a budget and stick to it. And lastly, be patient. Rome wasn’t built in a day, and neither will your financial security be. But with these tips, you’re well on your way!
Let’s get started!
Key Take-Outs
- Check to see that all of your records are up to date.
- Think about ways that using internet banking can help you save time.
- Be aware of what expenses you might be eligible to deduct from your taxes.
- Ensure you have met your superannuation obligations
- Mark in your calendar the significant dates on which you are required to take action and submit documentation.
Prepare For EOFY
1. Make sure your paperwork is current
Having all of the necessary papers in order prior to the end of the fiscal year helps to streamline the process. The following are some examples of records that you are required to keep:
- receipts for both the selling of goods and their purchase
- documents pertaining to tax returns, activity statements, and employee contributions to pension and other benefit plans
- the Goods and Services Tax (GST) returns and the Business Activity Statements (BAS).
2. Use online resources to streamline accounting
If you keep your personal and business finances in separate accounts, you will find that tax season and BAS (business activity statement) time are much less stressful.
You will be able to record all of your business expenses in a single location thanks to this, and you won’t run the danger of mistakenly claiming a deduction for a transaction that has nothing to do with your company.
Keeping your business finances separate from your personal finances is an effective way to manage your company’s cash flow.
If you are signed up for online banking, you may have access to tools that can help you keep track of your day-to-day transactions and compile the information you need for your tax return. For instance, Westpac’s online business banking provides the following:
- Access to bank accounts for third parties, including the option to “see just” those accounts, so that you and your book-keeper or accountant can communicate information regarding your cash flow.
- Bank feeds that allow your small business accounting software to link to your company’s bank accounts (such as MYOB, QuickBooks and Xero)
These elements of internet banking are intended to save time and simplify administrative tasks, while also providing assistance with the preparation of BAS and tax returns.
3. Manage your deductions
It is crucial to understand what you are eligible to claim in order to make sure that you get the appropriate tax deductions for the money you spend on your business. In addition, you should seriously consider applying for the well-known quick asset write-off programme that the federal government offers to small firms.
The initiative’s threshold has been increased from $30,000 worth of asset purchases to $150,000 for the 2019/2020 financial year. This change will take effect on April 1, 2019.
As a result, now is the time to evaluate whether or not you will require new office equipment in the year to come, as well as whether or not the equipment you now have needs to be serviced or replaced.
It is important to keep in mind that these assets must be installed and available for use before the end of the year 2020, and that assets costing between $30,000 and $150,000 are only eligible if they were ready for use between March 12, 2020 and the end of the year 2020.
If you prepay certain expenses for a period of 12 months or fewer, such as professional subscriptions, rent, wages, insurance, or utilities, you may be eligible for additional deductions. Visit the website of the ATO and do a search for ‘Deductions for prepaid expenses’ if you want further information on the different kinds of prepaid expenses that qualify for deductions.
You may be able to take advantage of Farm Management Deposits if you are the owner of a qualifying agribusiness. These deposits can assist you in better managing your tax position in years of excellent output. You won’t have to pay tax until you really start spending the money you deposited. Â
4. Eliminate bad debts
If you calculate your GST on an accruals basis, you can file a claim to get a refund of any tax you’ve previously paid on a debt that later turns out to be uncollectible. Include the bad debt in either your June quarter BAS or yearly GST Return in order to be eligible for a refund of the GST that you had previously paid.
However, before you go and write off a debt, you might want to think about giving the customer a little reduction if they pay by the 30th of June.
5. Fulfil your superannuation obligations
Companies that have duties related to the superannuation guarantee (SG) are required to make employee contributions of 9.5%. If you are able to fulfil your commitments ahead of schedule, by the 30th of June in 2020, you will be eligible to claim a tax deduction on your income tax return for 2020, rather than having to hold off until the following year.
Remember that employee contributions to their superannuation plans are not tax-deductible until after they have been put into the plans, so it is imperative that all payments be made before the end of the fiscal year.
6. Recognise deadlines
Create a reminder for yourself by writing down all of the relevant dates in your calendar so that you may avoid incurring penalties from the ATO.
End-Of-Financial-Year Money-Saving Tips
As the end of the fiscal year, on June 30, is just a few weeks away, now is an excellent opportunity to make significant cost cuts.
There are many different strategies to save money before the big day in June arrives, including taking advantage of end-of-financial-year (EOFY) deals on large-ticket items like automobiles and other expensive purchases, as well as making strategic tax deductions and contributions. Here are three money-saving recommendations for the end of the fiscal year that we hope will be helpful to you.
1. Purchase a new vehicle, home furnishings or vacation
The end-of-fiscal-year (EOFY) period is one of the finest times to find deals on new automobiles, especially if you are in the market to purchase one. In order to move inventory, both car dealers and manufacturers are willing to lower prices in order to make a sale.
The best part is that you should have options available from all of the different brands. Just make sure you don’t give in to the temptation of those tempting 1% finance rates.
Typically, they come with a number of unseen costs as well as a significant balloon payment at the conclusion of the term.
In addition to scoring a fantastic deal on a brand-new automobile, you might also be able to pick up expensive stuff (such as white goods, furniture, and appliances) for rates that are drastically reduced.
In addition, travel agencies are participating in the end-of-year-financial-year bargains by offering significant price reductions on vacation packages.
However, you shouldn’t simply consider the price that is advertised for sale as a given. Instead, you should enquire with the merchant about the possibility of receiving a larger discount from them.
Also, obtain comparable bids on the same model from many vendors to determine whether or not they will price match.
2. Contribute to a cause
Not only is giving to charity beneficial to one’s mental health, but contributions of more than $2 are also eligible for a tax deduction.
Therefore, now is the time to make any tax-deductible contributions to charitable organisations if you haven’t already done so during this fiscal year.
Your contribution to a charity that is recognised by the government could reduce any tax liability you have or help you get more money back.
Do the right thing even if you only have a tiny bit of extra money, and you’ll be rewarded with even more. Just remember to preserve those receipts for your records.
3. Add some extra money to your super
Consider making a contribution to your superannuation fund if you find that you have any spare cash. There is still time to reduce your taxable income by making further contributions through salary reduction.
You will be eligible to take a tax deduction for your personal contributions as long as the total amount of all of your contributions for the fiscal year, including contributions from your employer, does not exceed $25,000.
You might also be eligible for co-contributions from the federal government of fifty cents for every dollar you put in, although this will depend on how much money you bring in.
These are fantastic methods to bolster your funds for retirement and cut down on your tax liability. It is in your best interest to consult with a financial advisor before making any contributions. The planner will ensure that you are making the most of your savings potential.
Before the end of yet another fiscal year, there are a multitude of opportunities to cut costs and save money. You might be able to save costs and improve the amount of money you get back from your taxes if you follow some sensible advice, do some careful preparation, and make some astute choices.
EOFY Spending and Impact on Tax Deductions and Claims
1. Misconstrued Messaging
Many end-of-the-year ads promote the idea that if an individual or a small business spends $100, they would get the same amount of money back.
This is an unrealistic expectation. Although deductions on a dollar-for-dollar basis would be fantastic, this is not how tax refunds are calculated.
Let’s say that you paid $100 before June 30 for an item that is totally tax deductible. The Australian Taxation Office, also known as the ATO, is unable to provide you with that sum of money.
Nevertheless, that $100 would be subtracted from your total taxable income, which could result in a decrease in the amount of tax that you owe.
If you anticipate that your small business will have a profit at the conclusion of the fiscal year, spending some of that profit before the end of the year will help you pay less tax, but it will not result in a refund that is dollar-for-dollar equivalent.
If you are an employee and require tools or other equipment to assist you with the activities associated with your employment, purchasing these things may result in a greater tax refund for you.
Despite this, you will not receive a refund that is dollar-for-dollar equivalent to the amount that you have spent.
When it comes to an employee’s ability to claim an instant deduction for an expense, the general rule is that any item costing less than $300, including tools and other equipment, can be claimed in its entirety.
Items valued at more than $300 must, however, be depreciated and their value “claimed” throughout the course of the item’s lifetime. The ATO will decide how long the lifespan will be; for instance, a computer may work for up to four years.
You may be eligible to claim a deduction for the purchase of assets that are used in your business if you qualify for concessions offered to business taxpayers.
2. Do the Maths
Even if there is a time and a place for lawful year-end spending, individuals and owners of small businesses should always do the math to ensure that they are in good financial standing.
Most of the time, retailers who guarantee returns are unaware of whether or not the computer, sofa, or software is suited for the customer’s needs.
In addition, retailers do not have any insight into your wages or the marginal tax rate that you are subject to. Therefore, despite the fact that you might be able to save thirty percent on that keyboard and mouse set, it might not help your bottom line at all.
Consider it in this light: you probably wouldn’t take advise about your health from someone who smoked a pack of cigarettes every day, and for the same reason, you probably shouldn’t try to turn marketing phrases into financial strategy.
If a merchant assures you that you will receive a tax refund, you should rethink your decision because the amount of the refund depends on both your marginal tax rate and your turnover.
3. Crooked Claims
Because it has access to thousands of data points, the Australian Taxation Office (ATO) is particularly good at detecting irregularities in tax filings.
You might believe that declaring your weekend clothing as a uniform is not a huge concern, but the ATO will have a different point of view on the matter. The ATO takes the practise of over-claiming seriously; if they discover that you have done so, they will ask you to repay the money, in addition to any fines and interest that may have been assessed.
When it comes to reporting expenditures, it is important to be truthful about whether or not the item in question is utilised exclusively for work-related purposes.
For instance, let’s imagine you recently purchased a car or a computer; you should divide up the utilisation of these items so that you don’t end up claiming too much or too little. The services of an accountant are necessary at this point.
Avoid These Five Spending Pitfalls During The End-of-Year Sales
As a result of the end-of-financial-year discounts, this is one of the busiest shopping periods on the calendar. This is because businesses reduce the prices of a vast assortment of products in an effort to sell out any remaining inventory.
Because of the financial impact of the pandemic and the recession, many people are hesitant to spend money during the end-of-the-fiscal-year sales that are currently going on.
Typically, Australians will jump at the chance to buy expensive items at a discount (after all, who doesn’t love a TV for half price?), but this year, many people are hesitant to spend money.
Recent data from Finder indicates that only 27% of Australians want to buy during the mid-season bargains this year, which is a significant drop from the 76% who did so in 2019.
As a direct consequence of this, it is anticipated that end-of-financial-year (EOFY) sales spending will reach $2 billion, which is $3 billion less than in 2019.
Those who are still intending to shop can take advantage of the many deals that are still available. After a disastrous quarter, businesses strive to see who can make their cash registers ring the loudest, and what better way to do this than to decrease prices?
Because of these price reductions, the end-of-the-year discounts are an excellent opportunity to replace an old laptop or buy a heater at a reduced cost. However, price is not the only factor to consider while looking for a good offer. It is possible for several factors to come into play, including refund policies, tax ramifications, and financing choices.
So before you head out to the stores (or get your credit card ready to shop online), here are some of the most common shopping mistakes that you should try to avoid during the end of the fiscal year.
1. Purchasing something solely because it is discounted
Do you really require that fifty percent off widescreen television, despite the fact that it can appear to be a fantastic bargain? If the response is no, you should continue walking. The purpose of sales discounts is to redirect your attention away from the money you’re spending and towards the money you’re saving. Consequently, in the days leading up to the 30th of June, compile a list of the things you require and commit to following it.
2. Not checking the company’s policy on returns
You have the right to a return if the goods you purchased does not live up to the standards you set for it, right? However, this is not always the case. If a product sold in Australia is defective or does not meet the specifications listed, the law requires the shop to either fix, replace, or refund the customer for their purchase.
But what if you decide to alter your decision?
If you purchase anything and then decide that you do not want it, it is up to the vendor to determine whether or not you are qualified for a refund.
However, other brands, such as ASOS and THE ICONIC, do not provide refunds for customers who change their minds after making purchases. It is important to examine the return policy of a company before making a purchase because some retailers won’t even refund things that are on sale.
3. Not evaluating retailers differently
Before making any kind of purchase, whether it’s a new washing machine or a new pair of shoes, you should always check out what other brands have to offer. It’s possible that one retailer is discounting an item by 20%, but how do you know that it isn’t also available at a cheaper price at another retailer?
Before making a purchase, you should make it a goal to check the prices of at least three different brands or stores to verify that you are receiving the greatest bargain possible. When comparing pricing, you must also take into account the cost of mailing; depending on how much it is, this can make or break a deal.
4. Omitting to declare deductible expenses on the tax return
Do you put in hours at home? Any home office supplies or furniture that were bought before the 30th of June could potentially qualify you for a tax refund. This includes stuff like laptops, keyboards, desk seats, and printers among other office necessities.
You have the option of filing a claim for either the entire cost of the item (up to a maximum of $300) or the fall in value (for products that cost $300 or more).
You should keep in mind that even while this may be a fantastic approach to get even with certain costs, you are still spending money and not saving it.
When it comes to purchasing expensive products, it is essential that you do not fool yourself into thinking that you will be compensated dollar for dollar.
5. Registering for in-store financing without reading the terms and conditions
A number of stores that sell white goods or electrical equipment also provide in-store financing options. Because of this, you are able to pay for products over a longer period of time and in a number of separate instalments. But exercise caution with everything that you sign up for.
It may be tempting to fall for offers such as “interest-free” financing, but you should always be sure to read the fine print.
As soon as this interest-free time comes to an end, it is possible that both your interest rate and your monthly payments will increase significantly.
Additionally, in order to receive the funds, you will typically be required to sign up for a credit card or store card, both of which may come with significant annual fees and interest charges.
Before agreeing to terms with a store’s financing option, one should make it a habit to read all of the fine print. Additionally, make an effort to pay for the thing in full if at all possible.
The Bottom Line
When all of the flashing lights and catchy phrases are taken away, the process is actually fairly straightforward. The purpose of tax deductions is to exempt people and companies from paying income tax on assets and costs that are vital to their ability to do business and generate revenue.
Buying an item you require at a discounted price and then deducting the full amount from your taxes is perfectly acceptable behaviour. However, when tax law and basic logic are ignored in favour of marketing, our concerns begin to grow.
