EOFY cash flow planning: getting ready for 30 June and beyond

Why EOFY catches businesses out

For many businesses, the weeks either side of 30 June are crowded: stocktakes, super deadlines, decisions about asset purchases, conversations with the accountant, and then a run of obligations in the months after, including income tax for many owners and the first BAS of the new year. Profitable businesses can find themselves short of cash precisely because they had a good year and now owe tax on it.

Start in April or May, not late June

Book a pre-EOFY meeting with your accountant. Review profit to date, estimate the tax that will be payable and when, and discuss any timing decisions that make sense for your business. The earlier this happens, the more options you have.

Set aside income tax

Many owners are disciplined about GST and PAYG withholding but forget income tax, especially sole traders and partnerships whose tax is not withheld during the year. Once you have an estimate from your accountant, start setting money aside into a separate tax account. If PAYG instalments apply, keep them up to date. Our guide to GST and BAS cash flow planning describes a simple separate-account system.

Asset purchases and deductions

Buying equipment before 30 June can bring forward a deduction, and some small businesses can use simplified depreciation rules. But a deduction is only a fraction of the cost; the purchase still drains cash. If the business does not genuinely need the asset, or buying it would leave you short for the tax bill, it is not a good deal. If you do need it, consider financing it rather than paying cash so working capital stays intact. See buying equipment: cash, loan or lease.

Super

Employers must pay super guarantee contributions by the due dates. Missing them triggers the super guarantee charge, which is not tax deductible and can expose directors to personal liability. Keep super on schedule through EOFY. Any additional contributions for owners have their own timing and cap rules; ask your accountant.

Stocktake and slow stock

EOFY is a natural point to review stock. Slow-moving items tie up cash. Clearing them, even at a discount, can improve cash flow ahead of the tax period.

Forecast July to October

The quarter after EOFY is when the bills arrive. Map it with the cash flow gap calculator: include income tax if due, the July to September BAS, super, insurance renewals and any seasonal dip. If the forecast shows a gap, you have time to plan rather than react.

If the tax bill is bigger than the cash

Talk to your accountant and act early. Options include an ATO payment plan or clearing the bill with finance. For smaller amounts, unsecured funding sized on turnover may work. For larger amounts, a property-secured loan starting at $20,000 and reaching $5,000,000, with interest prepaid or added to the loan, can clear the bill without new monthly pressure. See ATO tax debt loans.

An illustrative example

A plumbing sole trader had his best year ever and faced a large income tax bill the following spring. No tax had been withheld during the year. With his accountant’s estimate in May, he started setting aside a weekly amount and used an unsecured loan to cover the remainder when the bill fell due. He then entered PAYG instalments so the following year’s tax was paid progressively.

Plan before the bills land

Enquire in a minute if a tax bill or post-EOFY gap is looming. We do no credit check to talk, a human reviews it, and there is no spray and pray. Get ahead of EOFY.