The end of the financial year for 2019 is literally a matter of days away, but for startups wildly scrambling to get their Ts dotted and their Is crossed before 11.59pm on Sunday night, there are still a few things to be done to make sure you have the happiest tax-time possible.
Remco Marcelis, founder of Standard Ledger and all-round startup accountancy guru, tells StartupSmart that, first of all, there are some general business boxes that startups need to tick.
Founders could take advantage of the instant asset write-off, for example.
However, “I’d caution everyone to only send money they really need to spend”, Marcelis says, “rather than going out and buying a car just because”.
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Also, he advises startups, like any business, to consider paying their superannuation so they can claim it as a deduction. It’s not due until July, he notes.
“But if you pay by June 30, you can claim it.”
But, of course, there is startup-specific admin founders must remember not to forget.
“If anyone is running an employee share scheme, don’t forget you’ve also got an ATO reporting obligation,” Marcelis warns, although he notes the deadline for this isn’t actually until August.
“It’s not really of benefit, it’s just one of those things,” he adds.
However, beyond making sure you’ve filed and filed correctly, there are a few things that could make this final week of tax time a little less taxing for startups.
Get your R&D in order
Marcelis’ major piece of startup-specific advice is around the research and development tax incentive.
If you’ve been conducting R&D throughout the year, “the sooner you get underway with your R&D claims the sooner you get that all-important cash back in”.
Startups can claim the R&D tax incentive rebates until 30 April. However, they’re allowed to submit their application from July 1.
Rumour has it that the record for first submission is 12.03am on the morning of July 1, Marcelis says. And there’s no reason why you can’t beat that.
“Let’s get this ready, let’s see if we can do better,” Marcelis says.
“At the end of the day it’s cash, so why wouldn’t you?”
Hustle your investors
Secondly, if you’re a startup raising investment, you can use the June 30 deadline to help prospective backers across the line.
If a startup registers as an early-stage innovation company, investing in it provides a tax incentive for the investors, Marcelis explains.
“Now is actually a good time to talk to your investors about trying to get some cash in before June 30,” he says.
“You can get a deduction for a donation, and you can also get a deduction for investing into startups,” he adds.
If an investor was to put in $100,000, they would be able to claim an immediate 20% on their own tax return.
In addition, investors won’t have to pay capital gains tax on that investment.
“Imagine getting a stake in the next Google or something, tax-free. That’s the potential,” Marcelis says.
He does add the caveat that the investor in question has to be a legitimate investor, and at arm’s length.
“It can’t be your mum,” he says.
However, if you’re able to tick all the boxes to become an ESIC, “use it as a spruiking opportunity to try to land that cash”, Marcelis advises.
New year, new you
Finally, once the weekend is over and a new financial year begins, Marcelis reminds founders not to just forget about their finances for another 12 months.
This is particularly applicable when it comes to R&D spending.
“We are unfortunately in an environment where audits are up,” he says.
“If you’re preparing for next year’s R&D, pay extra attention to making sure all your ducks are in a row for record keeping, just in case.”
It’s easier to manage record keeping as you go along, rather than retrospectively. You don’t want to find yourself in a position where you’re trying to remember what you did 12 months ago.
You’re also less likely to find yourself in hot water for false R&D claims later down the road.
“We are in an environment of increased risk,” Marcelis says, with the ATO cracking down on erroneous R&D claims and in some cases ordering businesses to repay millions of dollars.
With this in mind, he encourages founders to make a “new financial year’s resolution”.
“When you start R&D work, you’re going to call it R&D, and pay a bit of attention to that throughout the year,” he says.
“Keep records as you go.”