The rush to prepare for EOFY can throw a spanner in the works at the best of times. But spiralling interest rates, skyrocketing utility costs, commitment-shy investors and softer sales are making it harder than ever for many innovation businesses to balance the books ahead of 30 June. With just six weeks to go, we take you through five great ways to get your business in shape for EOFY 2023.
1. Get your records in order
Keeping good records is a must if you want to navigate EOFY successfully and optimise your allowances, incentives and tax liabilities. Tip-top record-keeping is also essential if you want to apply for the R&D Tax Incentive (R&DTI) refund.
General business records
For those general business expenses, start chasing down the key items of paperwork you’ll need for tax time. Gather all your receipts and tax invoices for income and expenses, your Business Activity Statements (BAS) for each quarter, employee super contribution records and any other tax return paperwork your accountant will need for your company’s tax return. Make sure your business has the right advisers, especially when it comes to accountancy, financial and tax matters. It’s important to verify that your tax agent is registered. Look out for the registered tax practitioner symbol on their website, letterhead or business cards. Alternatively, you can check the Tax Practitioners Board’s public register.
To apply for R&DTI, you need what the Australian Tax Office (ATO) calls contemporaneous records. These are the records that you create throughout the financial year when you plan and conduct your R&D activities. So don’t cut any corners on this particular admin task as that could scuttle your chances of receiving an R&DTI refund or offset. Basically, you need to keep two types of records if you want your R&DTI application to succeed: core R&D activity records and supporting R&D activity records. There are three key benefits of having ship-shape contemporaneous R&DTI records:
- You’ll be able to self-assess your eligibility for the R&DTI
- You’ll comply with the contemporaneous record-keeping requirements and have the paperwork you need to support your application.
- You’ll have everything you need at your fingertips if the ATO audits your R&DTI application
For more information about contemporaneous records and which formats are accepted for record-keeping purposes, check out our blog, Contemporaneous records and the RDTI: what you need to know.
2. Spend and save
When 30 June appears on the horizon, most B2C businesses start offering EOFY deals to entice their customers to spend and save before the current financial year ends. Make use of any EOFY offers that benefit your business, as you may be able to claim them as business expenses or write them off during the current financial period. Equally, if your venture is generating revenue, consider creating some EOFY offers/deals and discounts of your own to drum up extra sales and bring in additional income for FY23.
3. Leverage your allowances and entitlements
Don’t wait until EOFY. Carve out some time and make an appointment with your accountant or tax adviser. Put your FY 23 income statement, and whether your business structure is optimal for your company’s growth stage on the agenda for discussion. It also gives you an opportunity to ensure your business writes off any bad debts and is claiming every allowance, tax entitlement and incentive.
There are several crucial allowances, entitlements and incentives for businesses with innovation and R&D programs. If you haven’t already, check if your company is eligible.
Temporary full expensing
If your company’s aggregated annual turnover is less than $5 billion or it’s a corporate tax entity that meets the alternative income test, then you could claim temporary full expensing. This allowance supports business investment. For the current and past two financial years (between 7.30 pm AEDT on 6 October 2020 and 30 June 2023) you can claim a deduction in your company’s tax return. This deduction relates to the business portion of the cost of eligible new assets, eligible second-hand assets and improvements to eligible new assets and existing assets that would otherwise be eligible assets but were held by your business before 7.30 pm AEDT on 6 October 2020.
This particular incentive will no longer exist after 30 June 2023. So, if you have any second-hand assets or assets you’re looking to improve, make sure you have purchased and have them in place and ready to use by 30 June. In the 2023 Federal Budget, the government announced temporary full expensing will be replaced with a less generous instant asset write-off scheme. Visit the ATO website and talk to your accountant or tax adviser for more information.
Loss carry back provisions
Introduced in October 2020 in the midst of the pandemic, the government’s loss carry back provisions were designed to help businesses continue to make capital-intensive investments in their businesses. They allow you to carry back a loss resulting from an expensive investment and allocate it to a previous profitable tax year to create a new tax refund. It is a valuable incentive, especially for businesses with capital-intensive R&D. Like temporary full expensing, the loss carry back provisions will expire on 30 June.
The R&DTI is a Federal Government incentive. Its goal is to encourage Australian businesses to complete R&D that, without the incentive, they might not have conducted. Introduced in 2011, the R&DTI has two different incentive streams: a tax refund and a tax offset. Eligible companies with eligible R&D and an aggregated yearly turnover of less than $20 million can claim the R&DTI refund and receive 43.5 cents for every R&D dollar they spend.
An additional benefit of the R&DTI refund is that you’re also eligible to apply for Radium Advances to access your money early. So, you don’t have to wait months to get your tax back. Applying for Radium Advances regularly to reinvest in more R&D, sets up a virtuous circle for your R&D and automatically increases the size of your annual R&D tax refund. Head to the AusIndustry website to find out if your business is eligible for the R&DTI..
Staff costs are one of the biggest expenses for any business. But your staff are also one of your biggest assets. Many businesses are having to tighten their belts thanks to higher interest rates, utility price hikes, an investor drought and muted customer demand. So, before you start cutting staff hours or looking at redundancies, it makes sense to explore whether your business is eligible for a government-funded wage subsidy. You can apply for wage subsidies of up to $10,000 at any time if you’re hiring eligible individuals for ongoing roles in your business. Visit the Department of Employment and Workplace Relations website to find out more.
Apprenticeships and staff training
There are a range of Government incentives for younger and older workers. So, if your business is looking to hire from these demographics, check your company’s eligibility for government support. For example, the Skills and Training Incentive helps older Australians to refresh their skill sets and stay in the workforce. The Australian Apprenticeships Incentive System began at the start of FY23. It provides opportunities for apprentices to work in secure jobs in high-demand sectors to fill existing and future skill shortages.
Changes to single touch payroll and superannuation
Single Touch Payroll (STP) was introduced in 2018 to reduce the reporting burden on employers to government agencies about their stage and wage payments. Single touch payroll phase 2 (SPT2), was designed to streamline processes further and help employees who receive Services Australia benefits get correct payments on time. STP2 took effect in January 2022, but there were deferrals in place for some businesses and deferrals for some digital service providers, for example, accounting software platforms MYOB and Xero. If you haven’t already done so, double check that your business has transitioned to STP2 or if you had a deferral, check when it expires. Remember, in addition to your monthly filings, don’t forget to file your STP/STP2 information for all your staff for FY23 at tax time.
The Super Guarantee Percentage increased to 10.5% for FY23. Make sure your business is up to date with Super Guarantee payments for all your staff. And remember to pay Q4 by 28 August 2023. You’ll also need to factor in the next Super Guarantee Percentage increase. It’s lifting by 0.5% to 11% at the start of the next financial year.
5. Bridge your cash flow
Despite your best efforts, the current economic headwinds could still leave you facing cash flow challenges. Review your aged receivables and consider offering any tardy payers a discount for settling their debts before 30 June. If you have outstanding bills you need to pay, it’s worth reaching out to your creditors to see if you can pay in instalments or in the next financial year.
And don’t forget, if you’re eligible for the R&DTI refund, you could get a fast and affordable capital and cash flow boost by accessing your R&D tax refund early with a Radium Advance. With no minimum loan term, and a monthly interest rate of just 1.25% – 1.33%, a Radium Advance could give you the bridging finance you need to tide you over until tax time and help you start the new financial year on the front foot. Reach out to one of our R&D finance experts for more information and how to apply.