It’s almost 30 June, which means a new financial year.
Before cracking open the champagne for your EOFY party, there’s a few things to consider beforehand in terms of good tax planning.
Here’s what you need to think about.
SB Instant Asset Write-off
As Small Business Entities (SBE), startups have a number of specific enticements to spend some cash before 30 June, the first of which is the instant asset write off. This allows startups to fully depreciate assets under $30,000 (a spare laptop or workstation, perhaps?) as opposed to several years.
Prepaying some expenses prior to 30 June may increase your allowable deductions for this financial year. Eligible expenses are those that relate to a service period of 12 months or less. Some costs you can consider in your checklist are annual subscriptions, rent and utilities.
Review your R&D Tax Incentive eligibility & prepare the application
If you’re pursuing innovative technology & spent over $20,000 in Australia on R&D, then it’s ideal to work in concert with an R&D consultant during this time.
Here you’ll be able to review your eligibility and prepare your much of your application before 30 June so you can lodge in July. You’ll also need to review the substantiating documents to support any R&D claims made.
Certain expenditure such as wages and super should all be paid this side of the financial year.
Review ESIC status
If you had ESIC investors in the year, you’ll also want to ensure that you’ve collected all the necessary details to lodge an Early Stage Investor Company Report with the ATO before 31 July. Any share issues will need to be executed before 30 June with ASIC and should be accompanied by the share certificates at that time as well.
If your startup has issued ESOP or ESS interests in the year, then these should be valued and taken up as at 30 June appropriately in the accounts. Details will need to be submitted to the ATO & to the employee via an ESS report by 14 July.
Pay your employee’s super before June 30
To maximise deductions and reduce exposure to any penalties, it’s a requirement to make sure your employees’ super contributions are in order. You need to pay your employees’ super on time and in a way that is SuperStream compliant. You may also want to consider paying out any super on wages earned to the employee’s super fund before July since they are only deductible in the year actually paid.
Managing any net income
If your startup made any profit (are sure you are doing enough R&D?) you may want to consider dividends, wages & directors fees as part of the tax planning process for the shareholders and directors.
Once the tax position is established for relevant members of the group, dividends & director’s fees could be organised appropriately pre-June 30 to arrive at the most tax effective outcome.
If a family trust is involved, then a trust resolution should be finalised pre-June 30 to ensure the trust remains compliant for tax purposes.
Plan ahead for any tax outcomes
To avoid any tax surprises, it’s best practice to establish what your estimated tax refund or payable may be. The easiest way to do this is get your accounts up to date and ask for a tax projection from your accountant.
For the majority of early stage startups, a loss is usually likely which can be carried forward to future financial years. If payable, then you might choose to lodge in May the following year & save up for the estimated tax payable.
If you determine a refund is likely, then you’ll be in the best position to lodge quickly and recoup the funds. This is particularly the case with the R&D Tax Incentive, where founders are motivated to lodge their company tax returns in July or August.
For the most tailored approach to EOFY tax planning, the startup accounting team at Fullstack are available.