End of financial year tax tips for tourism and hospitality businesses

The end of the financial year is fast approaching. It’s easy for business owners to get confused by what they need to do in the leadup to 30 June.

We’ve compiled a list of tips to ensure your tourism and hospitality business makes a smooth transition from one year to the next.  

Temporary Full Expensing of Eligible Depreciating Assets- The Government has extended the Temporary Full Expensing of Depreciable Assets (TFEDA) stimulus measure, which many tourism and hospitality businesses will be able to utilise if they find they have cash available to them at the end of the financial year.  

From 7:30 pm AEDT 6 October 2020 to 30 June 2023 businesses with an aggregated turnover of less than $5 billion can immediately deduct the business portion of the cost of eligible new depreciating assets. For businesses with an aggregated turnover of less than $50 million, TFEDA also applies to the business portion of eligible second-hand depreciating assets.  

What does this mean for tourism and hospitality businesses? 

Perhaps there is an item of plant and equipment that you are wanting to purchase, and you need to manage your taxable income. If the asset is installed and ready for use by 30 June 2023 you may be eligible for an immediate tax deduction for the full cost of the asset. 

A word of caution- a tax deduction is most useful when it can reduce your business’s taxable income. With the effects of COVID hitting the tourism and hospitality sector hard, many businesses may find themselves making a loss, or a greatly reduced profit. It would appear unwise to go and invest large amounts of money to purchase assets for the sake of accessing the full expensing measures if your business is already in a loss or reduced profit position, especially when that money may be better utilised elsewhere in the business. It is important to not get caught up in the headlines, and really consider whether it’s a worthwhile investment for your business. 

Pay your bonuses

If you are wanting to pay your employees or directors a bonus at end of financial year to reward their hard work, make sure that you have this in place prior to 30 June to ensure that it can be claimed as a tax deduction. Be wary of the type of bonus that you are paying, the rate you need to withhold tax at, and whether it attracts compulsory superannuation.

Superannuation

To ensure that you can claim a tax deduction for the superannuation you have paid during the year, you need to pay your super for the June quarter by 28th July, and check that all the super for the 3 previous quarters has been paid. If you are late paying any super, it won’t be tax deductible and missed payments may attract the super guarantee charge which is also non-deductible. 

Super is only considered ‘paid’ when it is received by the fund which can take a few days, so avoid leaving it until the last minute.   Superannuation is only tax deductible when actually paid. Bring forward the June quarter tax deduction by paying all employee superannuation prior to 30 June. It has to be paid by 28 July 2023 anyway, but you will get your tax deduction 12 months earlier by paying prior to 30 June 2023.

End of year payroll processing

All businesses should now be registered for Single Touch Payroll, which greatly streamlines the end of year payroll procedure. If you’re using an accounting program like Xero this further simplifies the process. Many tourism and hospitality businesses have a large pool of staff, and this can be a great time to confirm with your employees any change of personal information and ensure that the details you have on file are correct. Remember to file your pay runs for the year, reconcile your payroll reports, and complete your STP finalisation declaration. Advise your employees that they won’t be receiving a paper group certificate and can instead access their income statement through their MyGov account.

Stocktake  

Tourism and hospitality businesses that buy and sell stock must ensure that they complete a stocktake at the end of the income year. There is an exception for small businesses if you estimate the value of your stock to have changed by no more than $5,000 in the year. Carrying out a stocktake will help you gain a better understanding of your stock levels by identifying slow moving or obsolete items and assist in ensuring that you have the right levels of inventory on hand. Excessive stock levels tie up cash which can be used by your business elsewhere.

Bad debts

Review your trade debtors listing and identify which of these are unrecoverable. These should be written off as bad debts prior to 30 June, to ensure that you can claim a tax deduction for them.  

FOR MORE INFORMATION

If you want further information about any of the above, come and speak to our accountants at your local RSM office.