What is the Financial Year?
The Financial Year is a 12-month accounting period that businesses use for financial and tax reporting purposes. It’s also called the Fiscal Year. In Australia the Financial Year starts on July 1 and runs to June 30, the next one being Financial Year 23 (FY23, July 1 2022-June 3- 2023). End of Financial Year is frequently abbreviated to EOFY.
What does EOFY mean for my business?
Many of the reporting and taxation obligations for the business for the financial year must be addressed at this time, requiring all records to be up to date and annual submissions made to the Australian Tax Office, ASIC and other regulatory bodies. This include creating end of year accounts, stocktakes, collating all records, lodging annual statements, tax and superannuation. Personal taxation is also assessed at this time.
The Australian Taxation Office will make an assessment of your financial statements and determine if you have paid the correct amount of taxation throughout the year, with a refund paid or additional payment required.
What do I have to do?
First thing to do is to speak to your accountant to make sure that you are clear what they need from you. Give yourself some time, so you can create a timeline and task list. If you are well organised there are some opportunities for managing your liabilities.
Most of the reporting requirements will be managed by your accountant, but you will need to prepare all the required records and files. Make sure you have copies of all receipts and all entries are up to date in your accounting software.
Can I reduce my tax?
Because your taxation is assessed on the income and expenses for the year to June 30, there are opportunities to make payments and purchases that can help to reduce your taxation for the current financial year so long as they are done before June 30. Often this can be bringing forward such outgoings that you would make later that would be applicable in the next financial year (if made after July 1). This can also include personal salary and superannuation payments, where there can be opportunities to reduce taxes for the financial year.
The application of tax rules is complex and affects each person and business differently, so speak to your accountant with enough time to review your financials for the year to date, to identity opportunities for action ahead of time.
Are there any other opportunities?
In the lead up to the EOFY, companies that sell to businesses use the opportunity to promote their products and services, leveraging the desire from some customers to make purchases before June 30. It also allows supplying businesses to reduce their inventory. If you sell to businesses you can do this too with some clever marketing.
Beside the compliances, is there anything else?
Preparing your financial reports forces you to take a good look at the financial performance of the business, so make the most of it. Go through all of your expenses line by line and see where your costs may have drifted too high. This can be a reality check for some businesses and a great opportunity to make some decisions about how to run the business better.
The new financial year offers a chance to plan ahead for the businesses; whilst you are reviewing your past results, it is a perfect time to look forward. Take the time to create a new plan for the financial year and formulate a budget for revenues, costs and profits for the new financial year.
A new Financial Year resolution to plan, strategies, track and measure your business can pay back handsomely.