As 30 June and the end of the financial year (EOFY) draws near, it’s essential for Australians to start their preparation to not only optimise their tax returns, but also ensure compliance and maximise potential tax savings. EOFY can be a stressful period, but with early groundwork and a clear understanding of what needs to be accomplished, individuals and business owners alike can navigate this time with confidence. We have compiled below a comprehensive list of 12 key items to consider in the leadup to 30 June, outlining practical steps to help you prepare effectively.
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Organise Your Paperwork
Start by ensuring all your financial paperwork is up to date. This includes income statements, profit and loss statements, receipts for business-related purchases, and records of tax returns, Business Activity Statements (BAS), GST returns, and employee superannuation contributions. Having these documents well-organised not only simplifies your EOFY process but also reduces stress and potential errors when filing taxes.
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Utilise Online Accounting Tools
Separating personal and business banking simplifies tax time by clearly delineating business expenses. This minimises the risk of mistakenly claiming personal purchases as business expenses. Utilising online tools can further streamline this process, providing automated tracking and reporting that ensures nothing is overlooked. Even inf you’re not in business, there are a number of great apps and programs available to help you manage your income and expenditure more effectively, during tax time and beyond.
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Maximise Deductions
Understanding what you can legally claim as deductions can greatly improve the outcome of your yearly tax return, and should form part of your EOFY preparation. Common deductions for individuals include laundry expenses, work-related travel, and equipment purchases. Business owners can often claim interest on business loans, business insurance, and tax agent costs. It’s vital to keep thorough records to substantiate these claims, ensuring you’re prepared for any audits or questions from the Australian Taxation Office (ATO).
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Superannuation Contributions
If you’re a business owner who employs staff, ensure you meet all superannuation guarantee obligations before 30 June to be able to claim relevant deductions. For personal contributions, remember to provide a valid notice of intent to claim a deduction to your super fund and receive written acknowledgement. Making sure these contributions are documented and submitted on time can significantly impact your retirement savings and tax liabilities.
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Stay Informed of Key Dates
Mark your calendar with all relevant lodgement and payment deadlines to avoid penalties from the ATO. Being proactive with deadlines helps ensure all financial responsibilities are managed in a timely fashion. Setting reminders can also help you tackle tasks incrementally without becoming overwhelmed as EOFY approaches.
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Additional Income Considerations
Income isn’t limited to what you receive from your employer. It can also include bank interest, dividends, rental income, and capital gains, among others. Understanding the breadth of your taxable income is crucial in managing your tax obligations effectively. Don’t forget to include any foreign income or profits from cryptocurrencies, as these are often overlooked and are subject to scrutiny form the ATO.
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Investment Strategies
Consider making prepayments on investment loans or planning capital gains strategies, such as selling underperforming investments to realise a capital loss. These actions can adjust your taxable income and potentially enhance your financial situation. This could also be a strategic move to rebalance your investment portfolio according to current financial goals and market conditions.
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Working from Home Deductions
With changes brought by COVID-19, the ATO has provided simplified methods for claiming home office expenses, such as a flat rate for all running costs. It’s important to decide whether to use this simplified method or calculate actual expenses based on detailed records. Ensure that you document your work hours at home to substantiate these claims effectively.
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Review Health Insurance Coverages
Understand the implications of the Medicare levy and surcharge, and consider whether acquiring or adjusting private health insurance could be beneficial, especially in light of potential rebates and tax offsets. Evaluating your need for private health insurance could not only help avoid the Medicare levy surcharge but also provide better healthcare options.
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Plan Ahead
EOFY preparation is an excellent opportunity to assess your financial health and prepare for future financial years. Consider how changes in your income or expenses might impact your future tax returns. Utilise any tax refunds effectively to build wealth or reduce debt. This forward-looking approach can help you achieve a more stable and prosperous financial future.
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Be Wary of EOFY Sales
Be sceptical of EOFY sales promotions. While they may offer savings, remember that deductions don’t provide a dollar-for-dollar return. Purchases should be made based on genuine need and potential tax benefit, not just promotional appeal. It’s important to resist impulse buys and instead focus on how each purchase fits into your broader financial strategy.
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Seek Professional Advice
An accountant or tax agent can be invaluable in navigating EOFY preparation complexities – and this is even more the case if you operate a business. They can offer tailored advice and help develop strategies to maximise your tax return and ensure compliance with tax laws. Having a professional review your tax situation can uncover additional savings or strategies that you might have missed.
[BONUS TIP] – Watch our Webinar!
On 23 May, we will be hosting a webinar online for our clients, with a comprehensive look at EOFY preparation and how you can make the most of the opportunities presented at this time of year. We’ll be covering super strategies and tax tips – surely not one to be missed as we approach 30 June. You can register for the webinar via this link. We hope to see you there!
As we wrap up, remember that effective end of financial year preparation goes beyond merely meeting compliance requirements. It’s about strategically managing your finances to potentially enhance your future financial health. Whether you’re looking to optimise your tax returns, prepare for upcoming changes, or simply get a better handle on your financial situation, now is the time to act. EOFY is a pivotal moment each year that offers the chance to assess, adjust, and plan with a long-term perspective in mind. By taking proactive steps now, you can enter the new financial year with confidence and a solid plan for financial success.
Please note the information provided within this article is general of nature and is not a personal advice recommendation. Prior to considering strategies discussed in this article we recommend you seek personal financial advice. Please be aware that, without the benefit of financial advice, you may be committing yourself to financial strategies or products that are not appropriate for your overall personal situation, needs and objectives.