It’s no secret that end of financial year (EOFY) comes with its challenges for many self-employed Australians. Whether you’re a sole trader, side-hustler or freelancer, understanding deductions to super and taxes – on top of running your own show – is enough to make anyone’s head spin. Thankfully, there’s a way to make sense of it all. How? By talking to your advisor.
Take our word for it; a trusted accountant or bookkeeper will become your best friend at tax time. But if it’s been a while since you last spoke – maybe even a year exactly (funny that, isn’t it) – you might not be getting the most out of their advisory. The good news? Now is the perfect time to pick up the conversation (and keep it going). To kick things off, we asked three experts to share their EOFY tips for solo operators.
1. Reconcile, and reconcile again
Up-to-date reconciliations are the secret to smooth sailing at EOFY. However, scrolling through a year’s worth of balance sheets just days before 30 June isn’t ideal. Instead, Natalie Furlong of Quick Smart Bookkeeping recommends getting into the habit of doing monthly reconciliations. She explains, “It’s a gigantic pitfall to leave everything to the last minute because if there’s an outlier, it takes so much time to go back and find what the problem might be. After all, no one remembers what happened 12 or even six months ago, right? Save yourself and your advisor the trouble by setting up a regular reconciliation process.”
2. Leverage tech to work smarter, not harder
In order to stay on top of your books every month, you’ll need to keep neat records. The best way to do this? Automate them. Accounting software like Xero can streamline everything from income and expenses to assets and liabilities.
For those who are often on the move (as many contractors or freelancers are), Luke He of Homemax Accounting suggests downloading the Xero Mobile app. He says, “My clients like it because they don’t need to be sitting at their computer to do the books. So it gives them the flexibility to reconcile, for example, on jobs and while travelling.”
3. Don’t forget to tax plan
Tax is something every business owner (and most people) need to consider. In fact, Miriam Eagle of Eagle Accounting says tax planning should be top of mind for every entrepreneur. “Before 30 June, there’s several things sole traders can do to minimise or defer their tax position. Whereas, if you don’t do any planning, you’re left in the dark on your tax bill and taxable income,” she explains. This also counts for superannuation contributions. Miriam says, “Plan to pay these out of your account by 15 June at the very latest. Otherwise, they might not count towards this EOFY if your fund doesn’t receive the contribution in time.”
4. Consider income protection insurance
The top thing Luke says all self-employed business owners should consider is income protection insurance. He explains, “When you work for yourself, there’s no guarantee that money will always come in. What if you have to unexpectedly step away from your business because you fall ill or have an accident?Investing in cover is financial peace of mind. Plus, it’s tax deductible, so now is a good time to seriously look into it,” he says.
5. Understand the terms and conditions of instant asset write-offs
As most business owners know, an instant asset write-off allows you to claim an immediate deduction for an asset you’ll use to run your business (within a certain threshold), like a vehicle or machinery. However, Miriam warns that many people forget these assets need to be in use (received, registered or installed) before 30 June in order to claim the deduction this financial year. She says, “There are all kinds of supply chain issues at the moment, meaning there’s no guarantee you’ll have an asset ready to go by the end of the month. Before committing to a purchase, do your research and be certain whatever tax-effective equipment you buy is in use by 30 June.”
6. Get organised sooner rather than later
It’s no secret that many industries are struggling to find staff at the moment, and advisory is no exception. Natalie explains, “Lots of accountants and BAS agents are having to turn down new clients because they don’t have capacity. So my advice is to get in touch now, and send your advisor what they need on time (if not early). That way, if you run into a problem with your books, they’ll have a better chance of helping you fix it before the end of the month.”
7. Think of advisory as an investment
Remember, EOFY isn’t the only time when you can benefit from an advisor’s expertise. So how often should you be in touch? Miriam says it all depends on your needs. “You don’t need to have a big meeting with an agenda every time you contact your advisor. Maybe you have an arrangement where they help you finalise your quarterly BAS and run their eyes over things to steer you in the right direction. Besides the benefits of tax planning, those regular conversations mean any problems are flagged before they become too big.”
These are just some of the pearls of wisdom advisors can offer leading into tax time. So whether it’s been 12 months or two weeks since you last spoke, now is the time to work together to nail EOFY and get into a new rhythm for FY23!
