Getting your finances ready for tax time

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getting your finances ready for tax time
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Getting your finances in order a month or two before the end of the financial year can make all the difference at tax time. By John Burfitt

It’s that time of year again with the end-of-financial-year deadline looming, meaning dental practice owners are feeling the pressure to ensure their accounts and records are all up to date and in order.

For many business owners, this is a time of scrambling to gather all their receipts, invoices, and any other financial documents to ensure they can dutifully and accurately present their income and expenses reports to their accountants for eventual delivery to the Australian Taxation Office.

But for too many others, Brisbane financial adviser Helen Baker claims, this key aspect of business is too often put off until after the 30 June tax deadline, with the result they potentially miss out on a range of money-saving opportunities. 

“There’s many things that should be looked into and addressed before June 30 that can go a long way to making the most of existing tax benefits and also smooth the way in planning for the times ahead,” Baker, author of On Your Own Two Feet, says.

“Too many times I hear people say, ‘I wish I had done something about that before June 30 so it would help my tax situation’. Of course, those matters can be looked at again as possible deductions in the next financial year, but a lot of this comes down to understanding in June exactly what is going on in your business and acting upon it wisely.”

Know your numbers

The month of June is a time when you need to know the state of your accounts; what is coming in, what is going out and the bottom line—namely your bank balance, Baker states.

“A business owner really needs to make time to know exactly what the state of play is with the business through these crucial final weeks of the financial year,” she says. “If you are flat out with patients, then instruct the practice manager to pull together a series of basic financial reports so you are across everything. This reduces the chance of any great shocks later on.”

She says knowing the numbers will also help with planning ahead or payments that need to be completed in time. “Everything you do now can make such a difference at tax time.”

Talk to your accountant

“Too often I hear clients say, ‘I’ll chat to my accountant after June 30’, and I respond, ‘You should have a quick catch-up before then’,” Baker says.

Knowing if there have been any changes to the tax rules and understanding what that might mean for a business could impact on invoicing and paying bills through June, or deferring such actions until after 30 June and into the next financial year.

A quick chat to your accountant might also offer some reminders of any outstanding matters you still need to address or offer a checklist to work through. Too many things go unclaimed at tax time so knowing the details early on can be significant.

Helen Baker, financial adviser

“A quick chat to your accountant might also offer some reminders of any outstanding matters you still need to address, or offer a checklist to work through. Too many things go unclaimed at tax time so knowing the details early on can be significant.”

Superannuation matters

Given the fluctuating nature of current economic conditions, ensuring staff including the practice owner have been paid their superannuation must be a priority. “This is something to get on to early, as I know of clients who don’t or forget to pay themselves super, and that becomes such a big issue not only with the ATO but also with your own wellbeing,” Baker says. 

She insists it’s vital through superannuation to put a focus on the personal side as well as the business side of the company. “With a stroke of a pen, any business can be devalued by a third due to a range of factors, but you need to know your personal investment in your super is up to date and your long-term retirement plan is intact.”

And that in the unfortunate event of bankruptcy and creditor demands, your superannuation is protected. “Just don’t let super become something you intend to fix up next year.”

Against all odds

As the cost of insurance rises, with some prices increasing by up to 30 per cent, it’s important that policies are not only up to date, but the practice owner is getting maximum bang for their buck.

“Ask any financial adviser, and too often we discover a business is either under-insured or they are paying too much for insurance in the wrong areas. This is when work has to be put in to get it right,” Baker says.

She recommends the practice owner speak to an insurance broker to ensure fees, premiums and the coverage provided are the right fit for the considerations of the company.

“No-one really likes to pay insurance, but it’s about protecting yourself in the event of something happening, and always knowing you have a back-up plan,” she says. “Getting this in order before the next 12-month financial cycle starts just makes good business sense.”

Pay it forward

Settling some invoices and ongoing regular expenses in advance can prove to be a good move for tax purposes if the present year has been a strong financial one but the coming one is not looking so promising.

“Paying a range of bills now before the end of the financial year for the future months may give you more deductions, and also clear some expenses that still lie ahead, so it can also make things easier down the line,” Baker says. 

“It really depends on where the business is at. Yet again, it is knowing your numbers and planning appropriately. All the systems are there, so it is a matter of making the timing work for you.”  

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