Year End Matters: Business
As the tax year winds its way to the end, the standard thought processes turn to year end planning matters or housekeeping which should be dealt with.
Whilst people will always run around at the last minute, a more strategic and efficient approach is to have your housekeeping matters dealt with as part of your regular accounting and business processes.
Outlined below are a number of areas that may be of interest if you are considering refining your accounting and business processes, which can also produce tax savings.
Bad debts are a part of being in business, however, to deal with them from a taxation perspective you need to formerly write them off and have the paperwork to support this. Waiting until year end to do this process not only increases work loads at the busiest time of the year, but can also adversely impact your cash flow as previously paid GST can be recovered.
Another important consideration is superannuation, which normally should be paid within 28 days of the end of the quarter to be deductible. However, this means that you pay tax on your superannuation accrual. Paying the superannuation on the final pay cycle of the year before year end eliminates this issue and does not adversely impact your cashflow.
Employee bonuses are another area where changes to internal processes can change your tax position. By aligning your employee contracts, timing of personnel reviews and communication of results, employee bonuses that would otherwise not be deductible until the following year can be claimed as a deduction in the current year. This can also impact associated taxes. By refining or establishing this process, a permanent difference is essentially generated by removal of an otherwise timing difference.
Following changes to the accounting standards in recent years the impact of accruals has been somewhat diminished, however, correctly calculating your accruals and having the back up to demonstrate the accuracy may mean the difference between a deduction this year end next.
In addition to the items above, a number of other areas may be worth examining including depreciation methodologies, payment of withholding taxes, and stock valuations.
Should you wish to discuss how any of the above may be applicable to your business please contact your relevant ESV engagement partner on 9283 1666.
Article by David Prichard