Year-End Preparation Kit

We are entering the final days of the 2012 financial year and there are a number of key areas where careful consideration and planning can assist in managing year-end tax obligations and providing you with information, checklists and tips you need to start the new financial year in the best possible shape. Now is an opportunity for business owners to review the current financial year and proactively approach the next.

Those who take action now to review their systems, processes and software are more prepared to hit the ground running on 1 July, placing their business ahead of its competition.

1.    EOFY Tips and Information

2.    Payroll Year-End Checklist

3.    EOFY Checklist

  1.    EOFY Tips & Information

·       Keep you financial records up to date. Identifying errors is much easier over a short time period than after 12 months’ time has passed, so perhaps review your books every week or month rather than every quarter. Mistakes can be picked up sooner, potentially saving you money in the long term. If you don’t have the time to do this and would rather invest time in working on your business rather than in your business, hire a professional bookkeeper. This ensures less stress and time to prepare your accounts, reducing costs of administrative tasks that your accountant may have had to do at a higher rate. Therefore saving you time and money.

·       Timing issues. The benefits of deferring assessable income or bringing forward deductions will depend on the circumstances of each business and their overall anticipated tax position in the current and future income years. The following are common deductions that can be brought forward:

ü  Interest

ü  Bonuses

ü  Directors Fees

ü  Training

ü  Development

ü  FBT June quarter installment

ü  Superannuation (must be paid before 30 June not merely incurred)

Please consider your cash flow position before any expenditure is brought forward or income deferred.

·       Write off bad debts before 30 June.

     Write off any outstanding debts that are 12 months or older and/or are considered non-  recoverable. Remember to claim back any GST.  

·       Trading Stock.

An accurate stock take must be undertaken at the end of the financial year. Any obsolete or damaged stock is able to be written off. 

·       Plant & equipment

Review the depreciation schedule and match to plant and equipment on hand. Account for additional depreciation deductions or write off assets that are obsolete or have been disposed of. This should be undertaken at the end of the financial year in conjunction with the stock take. Consider holding off buying business assets until the new financial year, because the instant asset write-off increases from $1,000 to $6,500 from 1 July 2012.  

·       Ensure your BAS and superannuation guarantee charge statements are lodged and paid by 28 July. Make sure to pay your superannuation guarantee contributions for the fourth quarter of 2012 by 28 July 2012. If you or you miss this deadline, you must submit a Superannuation Guarantee charge statement to the ATO. 

The following checklists are mainly based on the use of MYOB software but most of these would still apply to any business. 

   2.    Payroll Year-End Checklist

 

¨  Ensure that you have entered all wages to 30 June 2012

¨  Print key payroll reports

¨  Reconcile PAYG withholdings by comparing the total payments made to the ATO with the total PAYG figures appearing on the Payroll reports.

¨  Check that the superannuation amounts have been paid for the 3 quarters to date and reconciles for the year to date.

¨  Print or prepare Payment Summaries for your employees. Before you begin, make sure all of the employees you are preparing payment summaries for have an address (including town and postcode) and a tax file number recorded in their card. You will also need details of any fringe benefit amounts and reportable superannuation amounts for your employees.

¨  Backup

¨  Start new payroll year

¨  Load payroll tax tables before you enter pays in the new year

 

   3.    EOFY Checklist

¨  Record all transactions for the current financial year up to 30 June 2012 and clear the suspense account

¨  If you have inventory, you need to do a stocktake on 30 June 2012

¨  Reconcile all bank accounts, credit cards, bank loans, barter cards.

¨  Reconcile Accounts Receivable

¨  Reconcile Accounts Payable

¨  Reconcile Inventory – write off obsolete or damaged stock

¨  Reconcile Owner/Directors Loan Accounts & Inter Company Loans

¨  Reconcile GST Control Accounts

¨  Review Fixed Assets – new, sold, write offs

¨  Print Financial reports, review and compare to previous year

¨  Backup and send data file to your Accountant

¨  Enter adjusting journals provided by your Accountant and compare final P&L and Balance Sheet to the Accountant’s Financials

¨  Backup and store safely

¨  Start new financial year (keep prior year data).

 

by Antonette, ACK Bookkeeping Services.

FEDERAL BUDGET TAX CHANGES 2012/13

The following is a summary of the major tax changes announced in the 2012 budget that has an impact on individuals and businesses starting 1 July 2012.

Tax Changes for individuals:

The Flood Levy that was applied to payments made from 1st July 2011 to 30 June 2012 will be abolished from the 1st of July 2012. The flood levy was designed to assist affected communities recover from the recent floods by providing additional funding to rebuild essential infrastructure.
The tax-free threshold of $6000 will increase to $18,200. The maximum value of the low-income tax offset (LITO) reduces from $1,500 to $445.
The first marginal tax rate of 15% increases to 19% on taxable income that exceeds $18,200 but not $37,000.
The second marginal tax rate increases from 30% to 32.5% on taxable income that exceeds $37,000 but not $80,000.
There will no longer be a separate tax scale for employees entitled to leave loading. These employees will no longer have higher withholding from every pay during their time at work. Employees will therefore be taxed more accurately when the leave loading is paid. Employers making leave loading payments as a lump sum will need to use the marginal tax rate for back payments, commissions, bonuses and similar payments.
Around 60% of taxpayers receive a minimum tax cut of $300 and no one will be required to pay more income tax.
Individuals can now earn up to $20,542 from 2012-13 without paying any net income tax.
One million low-income earners won't need to lodge a tax return from 2012/13.

Changes that impact businesses:

• From 1 July 2012, the small business instant asset write-off threshold has been increased from $1,000 to $6,500 GST exclusive and the depreciation rate for assets costing $6,500 or more GST exclusive included in the asset pool will be 30% (15% for the first year) even for assets with an effective life of 25 years or more. Some may advise to acquire an asset in July 2012 rather than June 2012 to take advantage of this accelerated up-front deduction.
• From 1 July 2012 and for cars only, where the cost is $6,500 or more GST exclusive, an immediate deduction can be claimed by small businesses for both the first $5,000 plus 15% of the cost less $5,000. The balance of the purchase price is depreciated as part of the asset pool at a rate of 30% in the second and subsequent years.
• From 1 July 2012, businesses in the building and construction industry need to report the total payments they make to each contractor for building and construction services each year. These payments need to be reported to the ATO via a taxable payments annual report.
• There is no reduction in company tax rate. The company tax rate only cuts to 29%. The 28% have been shelved, including the small business tax rate reduction to 29% that was due to start from 1 July 2012.
• Tax loss carry-back concession - From 1 July 2012, companies can carry back tax losses so they get a refund against tax paid in the previous year, providing a tax benefit of up to $300,000 per year. This loss concession is limited to $1.0m of company income/revenue losses, incurred from the 2012-13 income year, and may be carried-back only to receive a refund of income tax paid, in the previous one or two years as the case may be, that is represented by franking credits remaining in the a company’s franking account. The tax benefit is limited up to $300,000 per year. The tax benefit will not be received by a company until it has lodged its income tax return for the year it incurs the tax loss.
• Super Guarantee Increase Confirmed From 1 July 2013 - The Government confirmed the progressive increase of the super guarantee rate to 12% in this budget. The increase is due to start from 1 July 2013, starting at 9.5%, and progresses to 20% from 1 July 2019.

Please consult your accountant should you have any questions or need more information relating to any income tax matters.