Guide to the financial year in Australia
- February 10, 2023
- 10 min read
Have you heard or seen the word EOFY? Or End of financial year?
Is this like the New Year or the Lunar New Year? Do we celebrate something?
Well, not really. Unfortunately, it’s not as exciting as these celebrations.
However, like these events, it is a time to assess – to assess your business and prepare it for the future.
This is an important time of the year for all business owners and management, so there’s no point, dilly-dallying, we’re going to jump right in!
Overview:
- What is the end of financial year?
- When is the end of financial year in Australia?
- Why is end of financial year so important?
- Steps to prepare for end of financial year
- What’s the Sleek scoop on end of financial year?
- Communicate with your accountant or financial advisor
What is the end of financial year?
The end of financial year is when businesses and organisations typically close their books and prepare financial statements for the past year.
This is also a good time for tax planning and filing.
When is the end of financial year in Australia?
In Australia, the end of financial year is 30 June.
Each country has a different end of financial year, so it’s important to understand when this is, especially if you have expanded your business in another country.
You will need to follow the end of financial year for the country you are located in.
Check out our blog – What are the tax dates in Australia? – this will help you manage your tax obligations during the year.
Why is end of financial year so important?
It might not be a time of celebration, but as a business, the end of financial year is an important time.
The end of financial year helps your business prepare for its future. It ensures your business is on track and can easily make adjustments to improve its financial health and comply with laws and regulations.
Most importantly, it gives you an idea of the overall performance of your company and helps you plan for success and growth through –
- Taxation:
The EOFY is often the deadline for filing taxes and ensures your business has completed all necessary information and submitted it on time.
- Financial Statements:
EOFY is the time when your business must prepare financial statements, such as balance sheets, income statements, and cash flow statements. These reports provide a snapshot of the financial health of the company.
- Budgeting and Forecasting:
It will give you an opportunity to review actual financial results compared to budgets and forecasts too, and make adjustments as necessary.
This will help in better planning and forecasting for the next year.
- Compliance:
You should also use this time to make sure your business is compliant with laws and regulations, including tax laws, insurance coverage, and legal matters.
- Planning:
This is an opportunity for your business to plan for the future, by reviewing contracts, employee benefits, and legal matters, and making strategic decisions.
- Auditing:
EOFY is a period when the company is subject to an audit. Auditing gives an external opinion on the financial statements of the company and ensures that they are in compliance with accounting standards.
You can skip this part if you are a small business – usually larger corporations (with a turnover over $50million) and Not-for Profits are subject to a yearly audit. Your accountant will be able to advise you on this.
- Archiving:
A good time to archive all your financial records and supporting documents for the year as per the legal and regulatory requirements.
- Communication:
End of financial year is an opportunity for your business to communicate with stakeholders about financial results and any significant changes or events that took place during the year.
Steps to prepare for end of financial year
Before you know it, the end of financial year is fast approaching.
The key to a stress-free EOFY is preparation.
Easily said than done, right?
No worries, we’ll take you through it!
Yes, it involves a number of steps but we promise, they are easy to understand and if not, you can alway contact us, we’ll gladly help you.
Let’s start from the top:
- Review and reconcile financial records
Ensure that all financial transactions for the year have been recorded accurately and that bank statements and other records match.
This should be your first step. Because without up-to-date records, you really can’t complete the other steps!
- Prepare your financial statements
Use the reconciled records to prepare financial statements, such as balance sheets, income statements, and cash flow statements.
- Review all budgets and forecasting
Compare actual financial results to budgets and forecasts, and make adjustments as necessary.
- Review your tax obligations
Review tax laws and regulations to ensure compliance and take steps to minimise tax liability, such as making contributions to retirement accounts or claiming all eligible deductions.
- Review your insurance coverage
Review insurance coverage to ensure that it is adequate and that policies are upto-date.
- Review all legal matters
Revise any pending legal matters and update any necessary legal documents.
- Review contracts
Review any contracts that are about to expire or renew, and plan for any potential changes.
- Conduct an audit
If your company is subject to an audit, you should prepare for it by gathering all the necessary documents and information.
- Communicate with stakeholders
Communicate with stakeholders about financial results and any significant changes or events that took place during the year.
We know these steps may look and sound daunting to you, but we promise there is lots of help out there.
Bookkeepers and accountants can all make your EOFY preparation super easy so the end of your financial year is just a small blip in the calendar!
What’s the Sleek scoop on end of financial year?
Sleek accountants and our technology works to make bookkeeping and accounting easy for our clients!
So, we have a few additional things to keep in mind regarding the EOFY including:
- Tax filing deadlines:
Be aware of the deadlines for filing taxes and ensure that all necessary information is gathered and submitted on time.
- Asset depreciation:
Consider any assets that may be depreciated, such as equipment or property, and take advantage of any tax deductions available.
- Inventory valuation:
Review the inventory and value it correctly as per the accounting standards, this can have a significant impact on the financial statements.
- Superannuation contributions:
Consider making contributions to retirement accounts to take advantage of any tax benefits or to meet contribution limits.
- Employee benefits:
Review employee benefit plans and ensure that they follow laws and regulations.
- Accruals and provisions:
Ensure that any accruals and provisions are made in line with the accounting standards, and in a timely manner.
Not very sure what accrual accounting is? Click to find out more.
- Archiving:
Archive all the financial records and supporting documents for the year, as per the legal and regulatory requirements.
Communicate with your accountant or financial advisor
Lastly and a little advice from us, your accountant can help you navigate the complex process of preparing for the EOFY and ensure that you are in compliance with all laws and regulations.
Think of your accountant as your best friend to keep your paperwork all up-to-date and to stay compliant (OK, maybe that’s pushing it a bit!).
But they certainly can help you through this very busy and important period for your business.
So, if you want some help, Sleek’s experience is to make your business life stress-free by setting up technology and processes so end of financial year is not something to be endured but a positive time to review and prepare for a successful future 😊
Talk to a Sleek team member today to discuss how to get you started. Call us on +61 2 9100 0480 or leave us a message here.
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