Preparing for EOFY – The Startup Tax Checklist

startup tax checklist

It’s almost June 30 which means a new financial year! Have you prepared your startup in terms of tax planning? Here’s 8 areas you should look into for the best outcome.

Nearing the end of the financial year in June is an important time for tax planning. Startups & their founders both need to understand their position currently and its implications for tax once 30 June elapses. Our startup tax checklist will help.

How can Founders prepare for June 30?

SB Asset Write-off

As Small Business Entities (SBE), startups have a number of specific enticements to spend cash before 30 June, the first of which is the instant asset write off which allows startups to fully depreciate assets under $30,000. SBE’s are also able to fully deduct prepayments for the 2020 financial year if the payment is made pre 30 June 2019.

Prepay expenses

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 may consider in your startup tax checklist are annual subscriptions, agency fees and utilities.

Review your R&D Tax Incentive status & prepare the application

If you’re pursuing innovative technology & spent over $20,000 in Australia on R&D, then its ideal to work in concert with an R&D consultant to prepare your application before 30 June. Also review the substantiating documents to support any R&D claims made. Certain expenditure such as wages & 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 ESIC investor report with the ATO before 31 July. Any share issues will need to be executed before 30 June with ASIC and should be be accompanied by the share certificates at that time as well.

ESS report

If your startup has issued ESOP 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 by 14 July.

Pay your employee’s super before June 30

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 employees super fund in late June since they are only deductible in the year actually paid.

Managing any net income

The payment of dividends, wages & director’s fees can be an effective means to manage tax of the shareholders and directors, as their tax and the company’s should be considered in total. Once every entity & person’s tax position is established, dividends, distributions & director’s fees can be organised appropriately pre-June 30 to arrive at the most effective tax 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.

Work out your tax position in June or July first

To avoid any tax surprises, it’s best practice to establish what your estimated tax 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.

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, please reach out to your startup accounting team at Fullstack.

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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech & online companies.

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