The end of financial year signals the start of a new savings year
As the end of the 2017/18 financial year approaches, deadlines loom. Whether from a business or individual standpoint, June 30 brings not only a new tax season, but also an opportunity to reflect and reassess spending and saving habits for the year to come.
End of financial year means tax time. And with just three weeks to year-end, and the start of the tax return season, more of us are keen to seek ways to minimise our taxable income and maximise any potential refund. If you’re quick, any additional charity donations, work-related purchases or maintenance work on investment properties could all lower your taxable income this financial year if paid before June 30.
For those filing as an individual, you will need to ensure you have a valid tax file number, records of any expenses and income you wish to declare, and are aware of any deductions or rebates you can claim. A comprehensive list of possible deductions can be found on the Australian Taxation Office (ATO) website.
Once the financial year ends, individuals’ tax returns must be lodged with the ATO by October 31. The deadlines are a little later for businesses (February 2019) and those lodging their returns through a registered tax accountant (May 2019). There are a number of options for how to submit your tax return, including:
- Online via the ATO’s web-based tax filing platform myTax
- Online accounting services such as ETax, E-lodge, Ezy Tax Online, H&R Block, TaxBack, Tax Return 24/7 and ITP
- By mail
- Through a registered tax agent
Businesses will want to ensure they have records of sales and business income, and proof of any expenses that can be claimed as deductions such as staff, contractor and operating payments. If you are self-employed and have enrolled in PAYG instalments towards your taxes during the year, you still need to file a tax return and ensure these instalments have been correctly reported.
Don’t spend it all at once
While it can cause some stress for the uninitiated or unprepared, tax season is more than just a chore. Your tax filing also presents the potential for a refund. With EOFY sales advertised en mass, be cautious about over-spending based on expected refunds. Spending money you don’t yet have is dangerous business, and may just see you paying more in credit card interest. The boost of cash from your tax return is also a chance to contribute a little extra to loan or mortgage repayments, or add to your savings.
According to the ATO, the average Australian tax refund is $2,112. At the end of financial year 2016/17, ASIC released results from a survey of MoneySmart users, reporting that 29% of respondents use their tax refunds to pay bills, 21% add it to their savings and 13% use it for loan or credit card repayments.
While steering clear of the sales is advised for those wanting to improve their savings, for those in the market for big-ticket items, it may be a good time to make key purchases for less. Electrical, furniture, white goods and even cars can be snapped-up at lower prices this time of year, just be wary of payment options that seem too good to be true. Dealers may have other ways of recouping money they would otherwise have earned on interest, so be sure to read any fine print before signing on. With EOFY sales wrapping up before tax return refunds are paid, you don’t want to be worse-off when the dust settles.
Preparing the necessary paperwork for your tax return provides a key opportunity to review your finances from the previous year, and make any necessary changes for the next 12 months. Individuals might want to take stock of any mortgage or loan commitments, consider their repayment plans, and whether it is worth refinancing.
Businesses may want to look at whether set targets were met, and what can be done differently next financial year. Creating a cash flow forecast can help to manage any potential shortfalls and ensure you can still pay your staff and suppliers. There are a range of online tools and apps that can help you with your forecasting, some with free trials or template downloads, such as:
- QuickBooks accounting software by Inuit
- Float cash flow software
- Dryrun cloud-based financial forecasting software
- Pulse app cash flow forecasting web app
- PlanGuru business planning software
With the new Federal budget announced on May 9, there may be changes pertaining to you or your business for the new financial year. The goods and services tax (GST) for example, will apply to the retail sale of low-value goods that have been imported for sale from July 1. Use this time to make sure you are going into the new fiscal year prepared for any changes that may impact your business reporting or tax liabilities.
Tax time tricksters
Scammers can also be spurred into action around tax time. In fact, in 2017 some 80,000 tax scams were reported to the ATO, with more than $2.5 million lost by Australian victims. Be wary of unexpected calls, emails or text messages notifying you that you either owe or are owed money on your tax return. Any correspondences asking for credit or debit card details for immediate payments of unpaid tax or administration and transfer fees are likely fraudsters at work.
Content on this website is for general information purposes only and is not intended as financial advice.