The end of the financial year is nearly upon us. To ensure that this period goes as smoothly as possible for your business and that you make the most of your tax return, it’s crucial to be aware of the key EOFY dates and follow certain tips to keep your taxes as low as possible.

With the economy slowing, businesses big and small need to run a tight ship. This means keeping the flow of money under tight control. At this time of the year, you should take advantage of all your tax deductions and avoid paying unnecessary taxes. 

In this article, we’ll walk you through some key ways you can do just that and keep your business thriving at tax time during a recession. 

Claim Deductions On Business Expenses

If you’re doing business in Australia, many of your day-to-day operating expenses are tax deductible. These include wages paid to workers, the cost of maintaining and repairing your office, and the costs associated with business trips. The deductible amount depends on the specific expense incurred. 

It’s also important to know which expenses don’t qualify for tax deductions, including private expenses. You’ll also need to pay full taxes on entertainment costs and any government fines you might have incurred. 

Keep Detailed Records 

To claim a tax deduction on work expenses, you will need to prove it was incurred for your business rather than for your private use. Some expenses might be a mixture of both: in these cases, only the portion of the expense that was used in a business context is tax deductible.

To claim these deductions, it’s crucial to maintain clear records of all expenses for at least five years. In most cases, you’ll need a receipt or an invoice at the minimum. Certain expenses might require additional documentation.

If you’re trying to get a tax deduction on a business trip, for instance, you’ll want to store records of your ticket, your travel plans and all transportation and accommodation, as well as proof that it was for work, and not simply a holiday with some networking thrown in.

File Your Taxes On Time

This goes without saying, but filing all your tax documents on time is key to avoiding fines and even potential litigation, which can involve expensive lawyer fees. 

You’ll need to prepare certain financial documents. These include:

1. P&L statement covering all your transactions over the financial year.
2. Document containing all the money you are owed and that you owe.
3. A stocktake of all the goods currently in your inventory.
4. File income tax returns, your GST, your FBT and any other taxes you might owe. 

If you fail to file your taxes by the deadline, your business can be hit by a failure to lodge (FTL) penalty. The amount you’ll have to pay is calculated by how late you are and the size of your business. You’ll have to pay either one, two or five penalty units, depending on whether you’re a small, medium or large business, every 28 days that pass from the tax deadline. As of July 1, 2023, a penalty unit is $313. 

Hire A Tax Agent

As a business owner, you might not have an in-depth understanding of all the ins and outs of the Australian tax system. To develop a business tax strategy that makes the most of your tax returns in the long and short term, you can work with a licensed tax professional. 

A tax agent can help get your business over the line during this end-of-financial-year period. They’ll be there to help make sure you submit the correct documents on time to avoid FTL penalties. If you do incur penalties, tax agents can help you figure out if you’re eligible for penalty relief. If you pay your taxes late but the fault lies with the agent, you can make use of the safe harbour provision to ensure your business is not affected. 

Besides making sure you pay on time, a tax agent will also help you maximise your tax deductions. They can help you parse deductibles from non-deductible expenses and organise your payment records so you can present sufficient evidence to tax authorities. 

Before hiring a tax agent, make sure they’re registered with the Tax Practitioners Board. There are lots of scams out there, so be careful. 

The end of the financial year can be a stressful time for businesses of all sizes, particularly during recessions. At this time of the year, many companies find themselves scrambling to prepare financial statements, find records of their expenses and correctly file their tax returns.

This process doesn’t have to be difficult. With some preparation and an understanding of the tax system, you can set up your business to make the most of your tax returns, even during a recession. Start following the tips in this article today and prepare for the end of the financial year of 2024 now.