A guide to the financial year in Australia for foreign businesses

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The end of the financial year is a key time for Australian businesses, whatever they do or wherever in the country, they are based. It is a time for reflection and analysis of the year just passed and a time to plan and formulate strategies and tactics for the year ahead. As well as providing an opportunity for companies to look at their own financial wellbeing, the year-end is also the time to comply with the Australian legal requirement to complete an annual tax return.
The financial year is based on a twelve-month period, used by the Australian government and Australian businesses for tax purposes. At the conclusion of every financial year, all Australian businesses must reconcile their accounts and complete and submit a tax return to the Australian Tax Office (ATO) as it is generally referred to. The tax return will be a complete summary of revenue and costs and a summary of the businesses’ profits or loss. Once submitted the ATO will assess the amount of tax owed by the business.

It is essential that tax returns are completed on time and without mistakes or miscalculations. The amount of work needed to compile a tax return for most companies is enormous as it requires maintaining records of all expenditure and revenue during the financial year and then compiling those costs and revenues into a bookkeeping / accounting system that will accurately reflect the businesses’ true financial position. Most companies employ the services of a specialist financial organisation to focus on tax planning and timely and accurate reporting.

When does the Australian financial year start? The financial year in Australia, starts on the 1st July.
When does the Australian financial year end? The financial year in Australia, ends on 30th June.

download tax calendar - LODGMENT DATES FY 2021/2022



Financial year synchronisation with foreign parent company 

The accounts and tax return in Australia are usually prepared for the year to the 30th of June, although a different year end – known as a Substituted Accounting Period – can be sought from the ATO if you have an overseas parent company that prepares accounts to a different financial year end.

ASIC Corporations (Synchronisation of Financial Years) Instrument 2016/189 may allow a foreign controlled company to have a financial year of up to 18 months, in order to synchronise its financial year with that of its foreign parent.



End of the Australian financial year requirements 

Preparation
To lodge a tax return, a profit and loss statement is needed, a balance sheet, cash flow statement and the tax return from the previous year. All this information is required for the next stage.

Lodgement of the tax return
It is possible for a company or an individual to lodge their own tax return, but with the complexities of compliance and ensuring that the return is totally accurate, it is usual to engage an accounting specialist firm to prepare and lodge the tax return.

Business Activity Statement (BAS)
BAS statements are lodged monthly, quarterly, or annually (depending on turnover). The lodgement date for an annual BAS submission is the 31st October.

Review business activity
The end of the financial year is the perfect time for businesses to meet with their accountant and review the financial performance, the bookkeeping and financial reporting processes, as well as review whether the business achieved its targets and goals. It is also a good opportunity to revisit whether the business strategy and planning is still realistic and relevant and to decide if the business landscape is the same as it was in previous years or is changing. It is always helpful to have an objective expert involved in any business review and involving your accountant at the year end, is an ideal time to take a realistic view of the business and what the expectations should be for the next year and have a sounding board for new ideas and proposed strategic changes, as well as reviewing the financial impacts of any business driven or market forced change.

As part of the review, it is a good time to refocus on whether the requirements for investment in resources, insurance, or legal compliance have changed due to changes in the business structure or changed business dynamics. Tax and compliance regulations may change as the business evolves and grows and its structures change.

Financial Reporting Obligations

A small proprietary company (Pty Ltd) that is controlled by a foreign company must prepare and lodge a financial report if:

  • it was controlled by a foreign company for all or part of the year; and
  • it is not consolidated for that period in financial statements lodged with ASIC for that year by a registered foreign company, company, registered scheme or disclosing entity.

Other International Tax requirements
In additional to the above, a foreign company may require tailored advice to be prepared to determine the appropriate treatment of international tax, management charges and inter-company loans, employment contracts or other technical matters, such as:

  • Transfer Pricing Agreements
  • Thin Capitalisation
  • Employment Contract Setup Services
  • Employee Share Options Plans
  • Double Tax Agreements
  • International Dealings Schedule
  • Business & Personal Tax Structuring, etc.

Related: Your weekly Accounting must Do's and Dont's



Every business deserves a trusted Tax Advisor 

Azure Group
understands the significance tax plays on our clients’ wealth and place an enormous emphasis on tax planning to manage our clients’ overall position. Our International Tax team has significant experience managing the needs of international businesses as a specialist in bringing foreign companies to Australia and helping them be successful in the local market whilst managing their tax compliance and other international tax matters.

Azure Group understand the challenges and complexities of establishing a subsidiary business in Australia and how important it is for companies to be able to concentrate on doing what they do best, while Azure Group deal with incorporation, compliance, set up and continuity planning. We pride ourselves on providing timely and accurate information that aims to streamline compliance issues and add value to your business.

Related: Starting a Business in Australia Checklist - before, during and after!
Related: Australian Payroll: What Global companies need to know

DOWNLOAD OUR GUIDE TO SETTING UP IN AUSTRALIA

Have you noticed our Friday Expert Tips... here's one that relates to #Accounting

“Not dealing weekly, or even daily, with accounting tasks is like piling up the stock in the warehouse and then trying to find the one item you need a month later. Tackling your accounting tasks daily and weekly will make the business financials flow more smoothly, and give you more energy to work on the business instead of in it. Get in touch to find out more about our Outsourced Accounting Services.”

 

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Azure Group is the leading Chartered Accounting, Business Advisory and Strategic Advisory firm supporting the growth & success of fast growing entrepreneurial businesses.

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