What does end of financial year mean?
Australian law requires all business owners to keep records of all their financial transactions throughout each fiscal year . 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.
This typically includes completing your organisation’s bookkeeping and business plan for the new financial year and preparing the documentation for your company’s tax return.
When exactly is the end of financial year period?
In Australia, the financial year always ends on 30 June. The new financial year starts on 1 July each year and runs for the next 12 months. These financial year dates are always the same.
You can lodge your final tax return for the year any time between 1 July and 31 October, so you have some time to get everything in order after the official end of the financial year.
Related: If you are feeling stressed during the busy EOFY period, read How to Maintain a Positive State of Mind During the Coronavirus Pandemic and beyond.
End of financial year checklist
We have compiled a simple small business EOFY checklist for you to make your end of financial year easier. It gives you an overview of the most important documents you need to organise and processes to follow as part of your end of financial year preparations.
Run final reports
During day-to-day operations, it’s easy to focus on the details without looking at the big picture. But at the end of each fiscal year , you will need to run your final reports and tally everything up for the year.
The end of financial year period is therefore the perfect opportunity to analyse your company balance sheet, cash flow report and profit & loss statement. This will give you some valuable insights into what areas are profitable and what you can improve next year.
Review superannuation
It’s crucial that your business makes your staff’s superannuation payments on time and that nothing is outstanding by 30 June. Superannuation payments are only tax-deductible when you’ve made them during the fiscal year you’re claiming them for, so double-check that you haven’t missed any employee’s super payments.
Issue PAYG summaries
The ATO requires you to give your employees their end-of-year pay-as-you-go (PAYG) summaries by 14 July each year. It’s worth reviewing your payroll totals before you issue these payment summaries and double-checking that your transactions match the figures on your payroll register. This will make it easier for your employees to file their tax returns.
Submit BAS and ASIC reports
If your small business files quarterly business activity statements (BAS), then the last one of the financial year is usually due by the end of July, so you have about four weeks after the EOFY to get organised.
Registered companies will also need to submit an annual statement to the Australian Securities and Investment Commission (ASIC). This includes paying your annual review fee and passing a solvency resolution. The ASIC website has all the details for you.
Reconcile payroll
Confirm that your payroll transactions match the information on your payroll register. This needs to be correct for your tax return to be accurate and to determine whether you are over the payroll tax threshold set by the Australian Government.
Take stock
If your company buys or sells physical products, you’ll need to carry out a stocktake to record your exact stock levels on 30 June. Also record the total value of all your stock.
Write off bad debts
As a business owner, you may be able to claim a deduction for any income you can’t recover from a customer or debtor. Such unrecoverable income is called bad debt. So, consider writing off any debtors or assets before the financial year ends to claim a tax deduction. The Australian Taxation Office provides detailed information on writing off bad debts if you need more guidance.
Review insurance policies
The EOFY period is perfect for reviewing your existing insurance policies and double-checking whether they are still the best and most cost-effective option for your business.
At the end of the financial year, many insurance providers will offer attractive deals to entice you away from your current provider, so it’s worth shopping around!
Take advantage of offers
Many businesses in all kinds of industries offer great EOFY deals in June each year, so if you need new office equipment, furniture or electronics, this may be an excellent time to secure a great bargain! Look out for emails or ads to spot what deals are out there for you.
Make backups
The EOFY is the ideal time to back up all your critical information. You should always make digital copies of all hard-copy reports and statements you are submitting to the authorities. Having both digital and physical copies gives you extra security in case one of the two methods fails.
It’s also a good idea to regularly back up your computers and hard drives. Although this should, of course, be done regularly, it’s often easy to forget while caught up in your day-to-day business. So, make it a habit to run an end-of-year backup each year. This is crucial because most businesses rely on their electronic systems for their bookkeeping, CRM or sales systems. You don’t want to get caught out losing any data here!
Talk to your accountant
Every business is unique, especially if you’re operating in a niche sector. The best way to ensure you have all your ducks in a row and are perfectly prepared for the EOFY process is to check in with your accountant for specific advice. They will let you know exactly what documents you need to prepare and submit.
It’s always easy to overlook something, especially as a busy small business owner, so talking to your accountant during the end of financial year process is highly recommended to make sure you don’t overlook any vital details that could cost you extra time or money later on.
Prepare documents
Once you have gone through all the steps above and have all your data ready, it’s time to prepare the relevant EOFY documents.
You typically need to have the following paperwork ready for your accountant and the ATO:
- a copy of your bookkeeping software reports
- your bank statements showing expenses and incoming payments, your total interest as well as your closing balance as of 30 June
- a list of your debtors and creditors as of 30 June
- if your business is listed, your company’s stock value as of 30 June
- a list of your assets, including purchase date and price
- a list of any government grants or payments such as COVID-19 support payments
- a summary of all payments made to your contractors
- an overview of all loans owed by your company, including the total interest paid in the fiscal year and their balance as of 30 June
- details of any vehicles owned by your company, including log books where applicable
- a list of your insurance policies and cover details
- a list of superannuation payments made for your staff
- a list of your petty cash expenditure during the fiscal year
- a copy of any leases of premises where applicable
- any other documents that may affect your tax status
Plan ahead
Finally, make a plan for the next fiscal year based on all the information you have gathered. Use the data you now have readily available to review what went well and what areas could be improved.
Based on your analysis, draw up some effective strategies that will help you achieve your financial and business goals in the next reporting period.
Tip: Remember to keep all your tax-related records for a period of five years in case you are audited by the ATO. Otherwise, you may be fined.
This handy checklist will help you stay organised during this EOFY period. Save it for next year to be well organised in good time and get a head start!
