Business Finance Consulting

The End of the Financial Year

We have officially entered winter time, end of the Financial Year sales have started and the Reserve Bank of Australia (RBA) has cut the official cash rate by 0.25% to 3.50%. This is the fourth cash rate cut in the last seven months and the cash rate now stands at 3.50%, down from 4.75% last November. A 1.25% reduction of the cash rate in this short period of time is a significant change, in principle.
These successive moves by the RBA are being welcomed by two types of businesses: First, the businesses with any kinds of borrowing as some banks are passing on part or all of the rate cuts. This should reduce the amount of interest paid by those businesses. The second type of businesses that should benefit from the cash rate cut is the ones involved in B2C. With hopefully lower interest on their mortgages and credit card, consumers should have more funds available to purchase goods and services.
Let’s now look at the questions that every business owner should ask himself/herself, in these last few weeks of the 2012 Financial Year:
  • Are you going to reach the budget target?
  • Are you going to finish the year with a Profit or with a Loss?
  • Is there any way you can boost sales in these last few weeks?
  • Have you collected all the money owed to you?
  • Have you made sure that all suppliers will send their invoices on time, for tax deduction?
  • How much tax are you going to pay?
  • Can you optimise the tax bill?
  • Etc.
This month of June is probably the busiest of the year on the administrative point of view. Because at midnight on 30 June; it will be too late.
Some simple things can have a big impact on your business’ financials: If you are going to end up with a profit and taxes would have to be paid, you may wish to bring forward some payments and/or expenses (cash flow permitting), to reduce the profit and amount of corporate or personal tax due.
Now that we have discussed matters that affect your business, let’s talk about your personal finances:
  • If your business is profitable, should you draw everything out or should you leave the money in the business until next year?
  • Will you be subject to Capital Gain Tax?
  • How much should you or other members of your family contribute to your/their superannuation?
  • Can you or other members of your family benefit from the superannuation co-contribution?
  • Are you entitled to claim the 20% tax offset of the excess for out of pocket medical expenses?
All these are matters that you need to decide on: If you are unsure, talk to your accountant and tax expert before it is too late.