How to make sure you’re on top of your taxation requirements before the end of the financial year as a creative-based business.
As the 30th of June approaches, it’s time to swap your paintbrushes and sewing needles for receipts and spreadsheets. Preparing for the End of Financial Year (EOFY) might not be as thrilling as unveiling a new masterpiece, but with a bit of savvy, you can make it work to your advantage. Let’s dive into seven practical tips to help you get your finances in order and ensure you’re maximising your returns.
Caveat: We are not accountants! For advice pertinent to your own circumstances, seek a professional accountants advice.
1. Organise Your Financial Records
Before you can dazzle your accountant with your financial prowess, ensure all your records are up to date.
This includes:
- Income: Compile all invoices and sales records.
- Expenses: Gather receipts for materials, tools, and all business-related purchases.
- Bank Statements: Ensure they align with your recorded transactions.
HOT TIP : Consistent record-keeping not only simplifies tax time but also provides clarity on your business’s financial health.
2. Reconcile Your Accounts
Chasing unpaid invoices? Now’s the time to follow up. Similarly, settle any outstanding bills to obtain a clear picture of your financial position. This practice aids in accurate reporting and maintains that much-loved and necessary cash flowwww.
3. Conduct a Stocktake
If you hold inventory, perform a stocktake to determine the value of your unsold items. This is crucial for calculating your Cost of Goods Sold (COGS) and can influence your taxable income.
4. Understand Deductible Expenses
Many creatives overlook potential deductions. Ensure you’re claiming:
- Home Studio Expenses: If you work from home, a portion of your rent or mortgage, utilities, and insurance may be deductible.
- Tools and Equipment: Brushes, sewing machines, or kilns used exclusively for your business can be claimed.
- Professional Development: Courses or workshops to hone your craft are deductible.
- Marketing Costs: Expenses related to advertising, including website hosting and design.
- Travel Expenses: Trips to suppliers or clients can be claimed, excluding personal components.
Remember, expenses must be directly related to earning your income.
5. Consider Prepaying Expenses
If cash flow allows, prepaying certain expenses can bring forward deductions:
- Rent: Paying rent in advance.
- Insurance Premiums: Annual policies paid upfront.
- Subscriptions: Industry magazines or software services.
Prepaying can reduce your taxable income for the current year.
6. Leverage Instant Asset Write-Off
For assets costing less than $20,000, you can claim an immediate deduction:
- New Equipment: High-end cameras, pottery wheels, or industrial sewing machines.
Ensure the asset is first used or installed ready for use by 30 June.
7. Seek Professional Advice
Engaging an accountant familiar with the creative industries can be invaluable. They can identify industry-specific deductions and ensure compliance with tax laws.
Resources
Here are some Australian-based accountants who specialise in assisting creative professionals:
- Lolly Accounts: Specialising in creative and marketing communications agencies.
- Hot Toast: Services for creative, digital, and startup companies.
- Lemonade Beach: Assisting individuals and small businesses in the creative sector.
- Walker Hill: Accounting services tailored for creatives.
For official guidance, consult the Australian Taxation Office’s resources:
- Deductions for Small Business: Australian Taxation Office
- End of Financial Year Checklist: business.gov.au
- Supporting Your Small Business: Australian Taxation Office
By proactively managing your finances and seeking expert advice, you can approach the EOFY with confidence, ensuring your creative business remains both compliant and profitable. Now, back to creating those masterpieces!
