Our Bookkeeping & Finance Blog

What is End of Financial Year aka EOFY?

superannuation

As the 2021-2022 financial year-end rolls around, it’s time for businesses to take stock of the past year and start planning for the next.

While every business structure, size and set-up is different, we all have EOFY obligations to meet, and ensuring that you tick everything off (and get it right!) can be tricky.

Following is Numble’s EOFY checklist on how you can navigate this time of year as efficiently as possible.

End of Financial Year need-to-knows

Let’s start with the basics: what is EOFY, when does it fall, and why is it important?

What is EOFY?

EOFY stands for End of Financial Year. Many people refer to it as ‘tax time’ because that’s when businesses and individuals need to file their tax returns.

When is EOFY?

The tax year runs from July 1 to June 30 in Australia. That means EOFY (End of Financial Year) falls on June 30.

Why is EOFY important?

EOFY is all about signing off on the closing year and getting ready for the next. It’s time to get your ‘house in order’ so the Australian Taxation Office (ATO) can confirm your business is operating above board. Ensuring your bookkeeping, taxation and planning are up-to-date is all part of the process.

Completing all record keeping activities

EOFY paperwork can seem endless, but it all comes down to these 5 must-dos.

1.  Profit & loss statement

This is a summary of your income and expenses. It gives you clear visibility on how much profit your business made (or lost) during the financial year. 

At tax time, you need to process all outstanding transactions to update your financial accounts with actual figures: sales (earnings from selling your goods or services), loans, expenses (rent, marketing, insurance etc.), depreciation, interest etc.

2. BAS (Business Activity Statement) lodgement

You probably keep on top of your BAS throughout the year, so EOFY is simply your prompt to check your lodgements are accurate and up-to-date. If not, it’s time to speak to your bookkeeper or the ATO about getting back on track. 

3. Payroll lodgements

You’ll need to reconcile your payroll to provide accurate payroll information to your employees. This entails reconciling and paying all outstanding Super and PAYGW and reviewing staff’s leave entitlements and other payroll liabilities. Reporting your staff’s payroll information is now done via Single Touch Payroll (STP), which automatically sends this information to the ATO after each pay run.  Your employees can access their personal payroll information via their MyGov account.

4. Stocktake

A stocktake entails counting all your products, goods or inventory and checking that it aligns with your stock control records. 

Calculating the value of your trading stock allows you to record your stock assets in your tax return accurately. 

5. Accounting reconciliation tools

As you embark on reconciling your accounts – that is, comparing internal and external financial statements – you may want to consider using accounting software specifically for this (often time-consuming) job. 

Moving away from manual reconciliation will:

  • Save time
  • Improve internal controls
  • Reduce errors
  • Reduce fraud

There are many accounting reconciliation tools out there, including:

Make sure you hunt around for one that suits your business. 

Understanding your tax deductions

Most of your business expenses should be deductible. Knowing exactly what is deductible, and what isn’t, will ensure you minimise your earnings. 

After all, tax time isn’t only about calculating how much you may owe the ATO.

One or some of the following may apply to you.

Operating at home

You may have always based yourself at home, perhaps you only worked from home during the Covid-19 lock-down, or now you WFH part of the week and in the office the rest of the time.

Whatever your situation, be sure to account for it as you wrap up EOFY. You can claim the business-related portion of expenses such as:

  • Electricity 
  • Internet
  • Phone
  • Rent
  • MV expenses
  • Depreciating value of items like office furniture and computers

There are some amazing online apps that help you record and track your expenses for tax purposes, such as; Dext, Hubdoc, ATO Expense App and AutoEntry, to name a few.

Travel expenses

You can claim travel expenses (food, accommodation transport and incidentals) if you are away overnight for work purposes. Make a habit of keeping and filing all your receipts to substantiate them at EOFY.

Digital transformation deductions

Do you have an annual turnover of less than $50 million? You can claim an additional technology deduction for expenses and upgrades for depreciating assets. This includes:

  • The adoption of portable payment devices
  • Improvements to cyber security systems
  • Subscribing to cloud-based services. 

Software and hardware expenses

Like other capital expenditures, your software and hardware are tax-deductible. 

Temporary full expensing

Eligible Businesses can deduct the business portion of the cost of eligible new assets immediately. The eligible purchases must be first held, used or installed ready for use between October 6, 2020, and June 30, 2023.

Temporary full expensing also applies to the business portion of eligible second-hand depreciating goods. Businesses can also immediately deduct the business portion of the cost of improvements to depreciating assets.

As for software, you can claim on both off-the-shelf and in-house. 

If you have purchased off-the-shelf software, you can make a deduction either in the year you bought it (if it has a life of one year or less) or over several years (if its life exceeds a year).

If you have your own in-house software, you can either deduct the expense annually using the prime cost method or, if it’s included in a software development pool, you’ll need to claim the different proportions of the expense each FY.

We recommend checking with your tax agent or the ATO website to ensure you’re not missing out. 

Meet with your accountant

Book an appointment with your accountant a month or two before the End of the Financial year. This will allow you time to review your business performance and tweak your accounts to maximise your tax position. You may wish to make additional tax-deductible payments, prepay insurances, clear loans, pay extra super of staff bonuses etc.

Tax time can be overwhelming for any business, no matter its size. If you’re struggling to deal with deductions, bank statements or anything else, it’s worth speaking to a trusted accountant. They are up-to-date with the latest rules and regulations and can advise you accordingly. 

Your tax accountant can ensure you finish on a high and prepare for any lows. 

Tax time doesn’t have to be the worst time

Although this time of year can fill even the most seasoned of business owners with dread, it doesn’t have to be all-consuming. Get your accounts reconciled and up to date to June 30 so that your accountant can efficiently and accurately prepare your tax return, while giving you the best tax advice.

By carefully reviewing this checklist and seeking the help you need, you can make EOFY a simple and streamlined process every year. By making sure, all your accounts are accurate, and up to date, you’ll also set your business up for the new Financial Year.

Need help with your EOFY paperwork?

Contact Numble today for expert assistance every step of the way.