Hi guys, just wanted to jump on today and share some tips for the end of the financial year.
And as we move closer towards the end of the financial year, what are some of the things that we should be doing?
Now, as we know, coming to the end of the financial year, we need to make sure we are addressing potential changes, or things that we need to do in plenty of time before the end of the year.
So it’s now the end of May, we’ve got a month left of the year. This is probably the last opportunity to make some of those changes or work out what we need to do to make sure that we’re finishing the year strongly, and also making sure that we’ve got everything in place to finish the year.
Here are my key tips for the end of the financial year
Make sure that
- we’re not paying more tax than we need to,
- that our financial records are up to date, and
- looking to see what opportunities there are to reduce those taxes based on the current legislation.
Instant Write Off is Key!
The government’s announced again that this is going to continue. We can do Instant write off’s on any major purchases, up to $150,000, it’s a quite a substantial amount of money, and it’s per item, it’s not a total amount.
For instance if in your current trade business, you’re showing quite a hefty profit in your profit and loss statement, you really need to be talking to your accountant to make sure that they give you an idea of what you’re going to expect to be paying in tax and give you some advice around what you could be doing to reduce that.
More information about instant write offs can be found here.
One of the things I recommend is that just because you’re going to be paying more tax, doesn’t necessarily mean you go out and spend lots of money, especially if you haven’t got a lot of cash flow. We don’t want to be spending money on things you don’t really need, just for the sake of it.
Sometimes More Tax Is Better
If you’re looking to buy a property, whether it’s your own home or investment property, we don’t want to be reducing your tax too much because this will affect how much the banks will lend you when they look at your financial records.
Make sure you mention that to your accountant when you’re looking at what tactics and strategic planning you’re doing with them about reducing your tax.
Sometimes it’s better to be making more money and pay more tax if you’re intending to purchase things when you need to borrow money for it.
Make Decisions with the End in Mind
Next thing is to do is to always check and to review what your three to five year vision is (check out my blog on tradies need a why statement here). If you’ve got plans to grow your business and you know that you want to be wanting to take on more staff or have you own premises.
This should affect how you spend your money. So for instance if you know that you’re going to have to pay, say $20,000 and you know that you’re gonna need to take on some more team members and you’re gonna need to buy some vehicles, why not buy them early? Because you’re gonna have to buy them anyway.
It’s just a timing thing so that you can offset that tax bill by buying that vehicle and that might save you close to $20,000. Yes, you’ve got to find the money to pay for that, whether it’s a loan or basically from your cash flow, but it’s $20,000 less dollars you have to find for the taxman.
Importance of Managing Your Cash Flow Throughout the Year
If you’ve been doing your financial splits every fortnight, you’re going to have the money in your tax account to cover your income tax anyway. You can either move the cash from your tax account to help purchase that vehicle, or that can go straight to your profit.
It’s really key to look at what your vision is for the future and what’s the steps you’re going to be taking over the next 12-24 months to see if it makes sense to be purchasing assets that you’re going to need for your business anyway.
It’s also really important that you organise and have those discussions with your accountant early, earlier the better. Ideally April, but as we’re in May we really need to do that straightaway.
If they suggest something to you, like purchasing a new van, how long is it going to take you up to find one? We need to give ourselves plenty of time, we don’t want to be rushing into purchasing just for the sake of trying to reduce tax. We need to plan it properly, so that’s really key.
What Else Can You Do?
So apart from that a couple of other things you can do if you’re looking like you’re going to have quite a big profit in the business are:
- see if you can reduce and not invoice some bills out at the end of June, hold them over into July.
- Same with expenses, make sure that you’ve got all your expenses in your system, see if you can prepay some things.
For instance, one of the things I offer my clients is that rather than continue their monthly payments, I can invoice them for the rest of their program now or before the end of the financial year so they can claim all of it this financial year rather than wait till next year.
So always look at seeing what pre payments can do whether you can pre pay interest, or pay some of those insurances, looking at those larger items as much as possible.
So hopefully these tips for the end of the financial year were useful guys! Look forward to catching you on the next video.