You might be breathing a sigh of relief, or perhaps still in the throes of the consequences, of being hit with big tax debts after the most recent end of financial year. The past few years have been a rollercoaster for a lot of businesses and individuals, so it’s time to make some habits and changes now that can steady the ship for the end of this financial year by not missing vital deductions. It’s not always avoidable to face hurdles at the close of a financial year, but you can certainly make steps to mitigate the stress as much as possible.
The scurry for paperwork as June nears is a common occurrence for business and personal taxes, particularly if your deductions exceed the threshold for proof (although, it is good to keep all evidence of deductions on hand, anyway). To ensure that your deductions are in order, and so working to avoid owing tax, make a habit of carefully filing and tracking your expenses throughout the year. Cleaning up your expenses means that you can claim significant, provable deductions and lessen the risk of missing vital ones. Anything from office supplies to travel expenses can be claimed. Set yourself up today with an easy system that keeps them organised, together and time/date stamped.
Keep track of bad debts, and write them off
Bad debts refer to loans or outstanding/unpaid invoices that can no longer be deemed recoverable, typically due to the financial circumstances of the debtee (though can also be as a result of a debtee passing away). To avoid increased tax liability, ensure you know which debts you will be able to recover in this financial year, and which you can write off as a sales and general administrative expense. Right up until you submit your claim, these debts can change status to recoverable if the circumstances of the debt change.
Prepay 2023/24 debts where possible
If possible, pre-pay debts that will be owed in the next financial year period. For businesses that have an annual turnover of less than $50m, there are specific rules that mean you can claim deductions for expenses paid in the current financial year, even if they are for the following year. The pre-paid invoice just has to be dated within 12 months of the payment, and is used for the next financial year.
Get professional advice sooner rather than later
While it’s not impossible to manage a debt-free EOFY on your own, it isn’t easy, especially when you’re concurrently managing a life and/or a business. The best way to clean out financial mess before the financial year bottle necks, and stress starts to rise, is to seek guidance from the people who have made finance their life’s work. Shaw Gidley can help you recover from any debts you faced this past financial year, and help you work towards a less stressful 2023 EOFY.