End of financial year checklist for Aussie startups
Receipts at the ready, it’s almost that time of year again! As the end of the financial year approaches here in Australia, it can be a stressful time for many businesses, especially startups. Given startups are so volatile and at such varying stages of business development, navigating the tax return process can be very tricky.
If you run a startup, this is your official final warning that you’ve only got a few weeks to make any purchases in this financial year. Big expenses can have a big impact on your return or tax bill depending on which side of June 30 they fall. If you’re eligible for the R&D tax incentive, remember that the threshold of eligible spending is $20,000 per financial year.
Whether you’re very early stage, just incorporated, with no accountant yet, or bootstrapping and walking that treacherous path of personal tax return and company tax return, or you’re just looking to maximise your deductions, we’ve got some tips for you!
Pssst…if you’re wanting some help with your startup, sign up for our FREE Coach & Connect service. You can find out more information here.
It's always a good idea to consult with a professional accountant or refer to the ATO's official website for the most up-to-date information and specific guidance tailored to your situation. With that said, here are some deductions that startups in Australia (and individuals) may be eligible to claim in their tax returns but may not be aware of:
Home office expenses: If you operate your startup from a home office, you can claim deductions for a portion of your home-related expenses, such as rent or mortgage interest, utilities (e.g., electricity, heating), internet service, and depreciation of home office equipment. This deduction is based on the proportion of your home used for business purposes.
Small business income tax offset: Eligible small businesses with an annual turnover below a certain threshold (currently $50 million) can claim the small business income tax offset. This offset reduces the tax payable on the business income, providing additional tax savings.
Crowdfunding costs: If your startup has raised funds through crowdfunding platforms, you may be able to claim deductions for expenses related to running the crowdfunding campaign, such as platform fees, marketing costs, and rewards or perks provided to backers.
Employee share scheme: If you offer shares or options to your employees through an Employee Share Scheme, there may be concessions available for the taxation of these arrangements. This can provide tax advantages both for the startup and the employees participating in the scheme.
Bad debts: If your startup is unable to recover outstanding debts owed to you, you may be able to claim a deduction for these bad debts. There are specific conditions and requirements for claiming bad debt deductions, so it's important to review the ATO guidelines.
Donations and sponsorships: Startups that make donations to eligible charities or sponsor community events or organizations can claim deductions for these contributions. It's important to ensure that the donations or sponsorships meet the necessary criteria for deductibility.
Self-education expenses: If you incur expenses for self-education or professional development directly related to your startup's operations, you may be able to claim deductions for these costs. This can include courses, workshops, conferences, and relevant educational materials.
Prepaid expenses: Startups can claim deductions for certain prepaid expenses that cover a period of 12 months or less. This can include prepaid rent, insurance premiums, or subscriptions for services essential to the business.
Disclaimer: This does not constitute individual tax and/or financial advice. Please seek consultation from an expert. Remember, eligibility criteria and rules may apply to these deductions, so it's essential to consult with a professional accountant and refer to the ATO's guidelines to ensure compliance and maximise your allowable deductions.