18th May, 2018
With end of financial year (EOFY) looming, I thought it would be the perfect time to give you an insight into what this time period is like for an accountant.
Most people outside the accounting space assume that accountants must hate end of financial year.
“You must be so busy, you must hate dealing with the ATO, you probably can’t wait until it’s over” – the list goes on.
End of financial year can often cause stress and anxiety for the average business owner, so to lighten the load, I thought I would share some common questions we receive.
Q: I hired someone last year and they’ve asked me for a payment summary. I’ve googled it but don’t know where to find the form.
So you’ve hired an employee, you haven’t issued them any payslips, you haven’t been withholding tax, you haven’t paid their super and you are worried about a payment summary form?
We see business owners hire employees without a care in the world for the underlying statutory requirements, and we only find out about it after the fact.
Most times this is because they do their own bookkeeping, have never engaged us in the past and figure they will just get us to fix it all up at EOFY.
Now this is not a quick fix, and to be honest it is a minefield that we’re often not willing to step through.
Q: I don’t like the ATO so I haven’t paid them. What’s the worst that can happen?
I know most times this is a rhetorical question, but Sarcastic Stacey just can’t seem to leave this one alone!
The worst that can happen is that the ATO can get pissed off that you haven’t paid your obligations, they can issue a garnishee notice and withdraw the amount owing directly out of your bank account.
This will more than likely put you into a massive cash flow hole and you probably won’t be able to pay your employees or suppliers.
Q: I paid my kids school fees out of my business account, can I get a deduction for that?
No.
Sadly, personal transactions are not business deductions.
This rule not only applies to the kids’ school fees, but you weekly Dan Murphy’s booze order, your Domino’s pizza order, your new pair of shoes, your grocery trips to Safeway.
Anything that is private or domestic in nature is not a business cost, you can’t claim the GST and you can’t claim the deduction.
The moral of the story is the keep separate bank accounts for business and personal expenses.
Q: We took the kids to Fiji on a holiday and I wrote a blog post whilst I was sitting by the pool. Can I claim the cost of the holiday as a work trip?
Firstly, where was my invite?
Secondly, no.
For a travel deduction to be legitimate, the purpose of the trip needs to be for business purposes.
Chances are you were staying at a lush resort for a nice relaxing family holiday and the blog idea just came out of the blue, but it was not the purpose of your trip.
There are at times reasons where an overseas holiday may be part business part personal but a travel diary would need to be kept to justify your claim (moral of the story – invite your accountant to Fiji).
Q: I saw a guy on Gumtree advertise tax services. He was so cheap, but now the ATO say I haven’t lodged a tax return – help?
If it’s too good to be true, then it probably is.
To lodge a tax return in Australia, the person lodging the tax return needs to be a registered Tax Agent.
Sometimes, dodgy people advertise tax services on Gumtree, take your money, have no intention of lodging your tax return, and they will vanish never to be seen again.
You then need to pay a qualified professional to lodge your tax return, deal with the ATO because the tax return is now overdue and try to request a payment plan for a tax debt you didn’t know you had.
The moral here is to always use a qualified tax agent.
I could keep this list going forever, as end of financial year really brings out the random questions about business expenses and processes.
Whilst these questions may be received often and received quite innocently, the consequences of getting some of these things wrong can lead to not only financial penalties but also a destruction of your brand reputation.
EOFY is not the only time you should be seeking the advice from your accountant. Use their skills throughout your business journey.
Get comfortable asking these questions (and more), as the only stupid question is the one you have been too scared to ask.