22nd March, 2022
With increased absenteeism and talent thin on the ground, CA ANZ’s John Cuthberston is advising bigger businesses to get ahead of the curve when it comes to EOFY activities.
End Of Financial Year is generally considered a bit of a squeeze for small business and tax practitioners, but larger operations tend to have the benefit of being able to outsource around it.
But this year is shaping up to present some new challenges for bigger business, which may make tax time headaches more ubiquitous than before.
MYOB’s recent report on organisations with 20-500 full-time employees (FTE) shows that staffing is top-of-mind for this category in the outset of 2022, and with talk of a ‘Great Resignation’ building, some of the processes that had once been straightforward may be becoming difficult once more.
NZ Tax Leader for Chartered Accountants ANZ, John Cuthbertson FCA, said there still exists some variety in the way this business category handles EOFY.
“Businesses at the bigger end of town will typically have their own finance team and attend in house to their EOFY activities,” he said.
“They may prepare their income tax return and have it reviewed by their tax agent/advisor or outsource preparation of the return.”
However, those lean mid-market operators may still be operating more like a traditional small-to-medium business when it comes to tax processing.
“Businesses with around 20 FTEs are likely to have an in-house accountant or accounts person who will complete the majority of the EOFY process.
“Depending on the business there will be collaboration to varying degrees with an external accountant to complete this process and typically to finalise statutory financial accounts.”
“It is important that businesses are organised in their approach to EOFY for tax purposes – know what needs to be done, when it needs to be done by, and ensuring it is done correctly – getting the detail right is important,” said Cuthbertson in a recent statement to MYOB.
This means making certain accounts are reconciled in a timely manner, new employees are onboarded correctly and any stock take of assets and inventory is planned out in advance of the activity occurring.
Good technology and processes will go a long way to making these activities easy, but if key personnel call in sick, or leave your organisation at just the wrong moment, you’re going to want to have some contingencies in place.
“While the EOFY tax processes will be broadly similar in 2022 the challenges faced by businesses generally as a result of the pandemic will relate to availability of key personnel leading up to year end, and this could include in-house or external access to advisors.
“There may also be challenges in filing 2021 income tax returns by 31 March 2022 under existing arrangements.”
If you’re faced with specific challenges when it comes to meeting deadlines as a direct result of COVID-19, Cuthbertson says there may be extensions available to you, but don’t blindly trust this to be the case.
“CA ANZ has worked closely with Inland Revenue to ensure that appropriate variations are in place to allow additional time to complete various EOFY processes (for example the write off of bad debts) and lodge 2021 income tax returns without adverse consequence where there is a COVID impact.”
Better yet, the definition of what constitutes a COVID-related impact has been broadened for the 2022 income year.
“Such impacts broadly cover: ‘circumstances arising either from the imposition of COVID-19 response measures or as a consequence of COVID-19. This could include the impact of a key staff member or advisor having reduced availability, or the financial impact of COVID-19 causing significant disruption to the normal business operations of the taxpayer’.”
Forward-thinking leaders in the mid-market category will already be working on their year-end processes, as well as thinking ahead to tackling challenges in the next financial year.
According to Cuthbertson and the CA ANZ, this includes making the most of the resources you have available to you.
“Uncertainty around key staff availability at critical times can be mitigated by extending the timeframe over which the work is done and where possible front loading that work.
“If your workforce is already impacted, identify the key things that must be done before year-end and prioritise these – what will make the biggest difference? Engage early with external advisors and your auditor.”
He also recommends revisiting any remaining Government support or incentives you may have had access to recently to make certain you understand what you’re entitled to as this financial year draws to a close.
“Finally, it is important that you are aware of all relevant government COVID related concessions that may extend the time you have to complete year-end processes and return filing if your business is impacted by COVID.”
Find out how other mid-market businesses are planning to face the challenges of 2022 in the ‘Bold Ambition’ report from MYOB. Download it here.