What does end of financial year mean?
Australian law requires all business owners to keep records of all their financial transactions throughout each financial year. Keeping accurate financial records is essential for compliance and accurate tax filing. The end-of-financial-year period is when business owners need to finalise all their financial details from the previous 12 months. This means preparing records of your business income and expenses and filing all the paperwork required.
Reviewing and organising your financial records, such as payroll, profit and loss statements, balance sheets and cash flow records, is necessary to accurately prepare and file tax returns. This typically includes finalising your organisation’s bookkeeping for the financial year and preparing the documentation for your company’s tax return.
Engaging a registered tax agent can help ensure timely and accurate tax submissions. Tax agents can also provide advice and guidance on compliance and lodgement deadlines.
When is the end-of-financial-year period?
In Australia, the financial year ends on 30 June. The financial year starts on 1 July each year and runs for the next 12 months. The tax year in Australia also runs from 1 July to 30 June. These financial year dates are always the same.
The exact date on which you complete your end-of-financial-year checklist is up to you. You may wish to start checking off tasks before 30 June to ensure you complete all requirements. It can also be a tool that you can refer to all year round. Keep in mind, however, that some tasks have deadlines.
For example, every business must file a tax return, even if it did not earn income during the financial year. Most businesses will need to lodge the tax return for their financial-year period before 31 October in the following financial year. However, small companies may have a later deadline. Be aware of applicable dates to ensure you meet your obligations and avoid penalties.
The end-of-financial-year checklist
These are the tasks that your business may be required to complete at the end of the financial year.
Run final reports
During day-to-day operations, it may be easy to focus on small details without reviewing how it affects your overall business. For example, a bakery owner may be aware of the number of loaves of bread that they sell each day, but may not keep track of the profit gained from each sale.
At the end of each financial year, compile a final report that reviews business activity to determine your total profit. Analyse your company balance sheet, cash flow report, profit and loss statement and income statement to gain valuable insights, such as profitable areas and those that will require improvement next financial year.
These reports may also help you meet your tax filing and financial reporting obligations.
Issue PAYG summaries
The ATO requires employees to receive their end-of-year pay-as-you-go (PAYG) summaries by 14 July each year. It may be worth reviewing your payroll totals before you issue these payment summaries and double-checking that your transactions match the figures on your payroll register. Employees require this payment summary to complete their own tax return.
If you are a Single Touch Payroll (STP) employer, you will need to make a finalisation declaration by 14 July. The ATO will transfer this information to pre-fill employees’ online tax returns.
Submit BAS and ASIC reports
If your business is required to file a business activity statement (BAS), whether monthly, quarterly or annually, ensure you submit it. Penalties may apply for overlooking this task if, for example, you are busy with other end-of-financial-year reporting tasks and forget to complete it.
Registered companies will also need to complete a company annual review through the Australian Securities and Investment Commission (ASIC). This includes paying the annual fee and passing a solvency resolution.
Reconcile payroll
An accurate record of your payroll transactions is required to complete your business’s tax return. It also ensures your business is paying the correct amount of payroll tax. Therefore, confirm that your payroll transactions match the information on your payroll register.
Take stock
If your company buys or sells physical products, a stocktake to record your exact stock levels is required as close as possible to 30 June. Also record the total value of your stock, as this can help with your end-of-financial-year planning and tax requirements.
Write off bad debts
Your business may be able to claim tax deductions for any income you cannot recover from a customer or debtor. Such unrecoverable income is called bad debt. To be eligible to claim deductions for bad debts or assets, ensure you meet the Australian Taxation Office’s requirements and keep accurate records.
Review policies and contracts
The end-of-financial-year period can be a good time to review policies held by the business, such as insurance, to ensure they remain the most cost-effective options. Lease arrangements, enterprise bargaining agreements and supplier contracts may also expire at the end of the financial year, so check that you are still covered or whether you have new obligations to meet.
Take advantage of offers
The cost of tax-deductible purchases made shortly before the financial year ends are more quickly recouped through your tax return than if made earlier in the financial year. This can help your cashflow. Eligible businesses may be able to claim the cost as an instant asset write-off.
Meanwhile, suppliers of the goods that you want to purchase may also offer good prices as they try to sell their goods ahead of a stocktake, providing cost-effective options for your business to upgrade.
Make backups
The end of financial year may be a good date to ensure critical information that is stored on electronic devices is backed up. Digital copies of hard-copy statements can also be made at this time.
While not an official regulatory requirement, making it a task on your end-of-financial-year checklist ensures this is completed at least once a year. It also ensures the information is readily available when you complete financial reports and other administrative tasks.
Talk to your accountant
Even if you have a standing appointment with your registered tax agent or accountant, consider contacting them beforehand to confirm requirements. They can provide specific advice on information you will need to have available, and can advise on any new criteria you need to meet or information you will need.
Consulting a tax professional or accountant may also help ensure compliance, optimise your tax position and assist with tax planning.
Check documents
The documents that businesses require at the end of financial year to meet their legal obligations can differ, but these are some of the most common:
- a copy of bookkeeping software reports
- bank statements detailing expenses, income, total interest and the closing balance on 30 June
- a list of debtors and creditors as at 30 June
- your company’s stock value as at 30 June
- a list of assets, including purchase date and price
- a list of any government grants or payments
- a summary of all payments made to contractors
- an overview of all loans owed by your company, including the total interest paid in the financial year and their balance as at 30 June
- details of any vehicles owned by your company, including logbooks where applicable
- a list of your insurance policies and cover details
- a list of superannuation payments made for employees
- a list of petty cash expenditure during the financial year
- a copy of any leases of premises where applicable
- receipts for all business expenses and deductions (these are essential for tracking expenses and supporting your claims)
- any other documents that may affect your tax status.
Making copies of these documents and storing them in one location can make it easier to access them when required. The Australian Taxation Office generally requires documents to be kept for five years beyond the financial year to which they relate. However, there are some instances in which documents are required to be held longer.
Plan ahead
The final task on the checklist is to plan for the next financial year, based on the information gathered for the previous year. Use the data you now have to review what went well and what areas can be improved. You can also use it to set realistic goals for the year ahead and devise effective strategies to achieve them.
Leveraging digital tools and accounting software can streamline your end-of-financial-year processes and improve accuracy. These tools can automate record keeping, expense tracking and reporting, which can also save you time. If you have not already incorporated some of these tools in your business, consider doing so for the next financial year.
This checklist may be invaluable to help you stay organised each year during your end-of-financial-year period. It may also be a handy tool to refer to during the year to help you prepare early for meeting future requirements.
