3 Ways to Kickstart the Financial Year

Jul 7, 2021

1. Get Organised

Get your last financial year tax return information compiled, completed and lodged.  Whilst we recommend not rushing in the first few weeks of July, it is possible to compile your documents (in an electronic format) and to review your bank statements early.

If you use cloud based or accounting software, your yearend will generally be automated, for those still on manual records or excel spreadsheets ensure that the transactions match your bank statements.

Download all bank statements, save them in a secure location using a file name reference that makes them easily identifiable.  Consider a password to protect your financial data.

Download Dividend Advice statements, review your bank statements to ensure the ‘date paid’ matches and has been paid to you and into the correct bank account.  The date the dividend is paid (according to the Dividend advice) will determine the financial year, paying particular attention to the June/July dividends as some are only declared and not paid until the next financial year. Again, consider a password to protect your financial data.

Trust income from Managed investments is verified by a Tax Statement, which is different from an Annual Statement and often does not get issued until at least September or October of the following financial year. It is important to receive your Tax Statement before lodging your return, as there are different components involved in the trust income, which could be tax deferred, tax free or return of capital receipts, none of which you will be able to determine easily, unless you review the investor notes released by the listed Managed Investment entity.

Reconciling Payroll is important as your employees will wish to get their returns lodged quickly, as if they have significant work related expenses or have over paid tax throughout the financial year, they may be entitled to a tax refund, and lets not forget about the Low to Medium Tax Offset that has become a common feature of the Individual Tax regime, generally allowing for a definite tax refund for most Low to Medium Tax payers.  Ensure that you have included the correct amounts for Reportable Fringe Benefits Tax, Reportable Superannuation, and deductions in the correct places.  The ATO data match payroll records with employee’s tax returns, the information is pre-populated to individual taxpayers myGov accounts and other government agencies.

Finance/Loan statements are required to verify the amount of interest that can be claimed on business or income producing assets.  Reviewing these documents will also identify any draw downs during the year, keeping in mind that if the funds drawn from loans are for private use, this will affect the percentage of interest that is deductible or claimable on your tax return.

2. Plan/Budget

The simplest way to create a budget is to review your spending in the last financial year.  Where did you spend your money, where did you receive your money from – and is it likely that those transactions will continue?  Being conservative with your budgeted revenue and realistic with your budgeted expenditure will allow you to work out if you will be in the same or better position when this financial year finishes.  Keeping a monthly or quarterly budget will keep your business accountable, however the time period of your budget may need to be extended up to 18 months if there are projects that extend past the financial year.  Reviewing actuals to budget is also an important part of the process, and shouldn’t be overlooked for fear of being “off the mark”.

3. Take some time to review your “Why”.

Have you started the financial year with the same or consistent goal as the day you started business?  If not, why has it changed?  Staying true to your vision will not only keep you on course, but will guide your business decisions. Take time to reflect on the last financial year, what worked and what needs to be revised. Make the decisions quickly to change or alter course, you haven’t failed until you stop trying.  What event has occurred in the last 12 months that wasn’t expected or has caused your definite change in direction – if nothing has occurred, why?