Countdown to tax time: 3 weeks from 30 June – review expense accounts

If you want your deductions to be as accurate as possible at tax time, then it stands to reason that you’ll want your expenses figures to be as accurate as possible.

 READ: 7 weeks from 30 June: Review your debtors

READ: 6 weeks from 30 June: Review your creditors

READ: 5 weeks from 30 June: Reconcile Super and PAYG Payable 

READ: 4 weeks from 30 June: review income accounts

You’ll be claiming tax deductions on expenses, so if you have items on your Profit and Loss Statement that aren’t tax deductable then these will need to be allocated elsewhere.

If you’re unsure, you are best to code the entry to a “Suspense” account.

Your accountant hopefully will reallocate items that are not eligible tax deductible expenses at the end of the year, but isn’t it on your agenda to have more accurate reports in the 2018/2019 year?

Also, it can be a costly exercise to a business if their accountant has to reallocate hundreds and hundreds of entries for expenses that may have been personal in nature.

As a guide, the main expenses on a Profit and Loss Statement should be cost of goods sold and other overheads.

Expenses like ATO payments, loan payments, credit card payments and personal drawings should be coded to a balance sheet item. If you think about some of these payments and how large they often are what effect they would have on your profit figure if incorrectly coded.

• Print a Profit and Loss Statement for the period 1 July 2017 to 31 May 2018 and diarise again to do for and 30 June 2018.
• What you are looking for is that the only items that are really business expenses and that will be claimed as a tax deduction are included as expenses. It is also a good idea to check that the correct GST has been used.

Review all expense accounts

• Is the expense business related? The expense incurred must be directly related to earning assessable income
• If the expense is private, it should be coded to either a Director’s loan for companies, Beneficiary’s Loan and trusts or Owner’s drawings for sole traders and partnerships
• All expenses have been entered, eg. 12 lease payments if you have leased something for the whole year, 12 rent payments, 12 telephone bills etc.
• Ensure the correct GST codes are on the transactions – you may need to go back and check the invoices (see table below)
• Ensure there are adequate narrations for the transaction so that when we review the file or in the event of an ATO audit, the details in the file are self-explanatory

As a guide the following deposits should be coded as follows:

Usually GST or CAP​

If you find after the review you have had to change a lot of GST codes, you can go into the Account List are and change the default GST code for either the Expense Account or the Supplier and that way you don’t have to remember the correct code.

MYOB online accounting software will ensure your business is always compliant with tax changes. If you don’t have MYOB online accounting software, there’s an online accounting solution for every stage of your business.

The information provided here is of a general nature for Australians and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’s circumstance will vary.