Have you heard the words Financial Year floating around and wondered what it means? If so, this blog will provide you with a deep understanding of what it is and why it is important.
The financial year is significant for tax obligations, tax benefits, financial planning, budgeting, and decision-making. Actually, pretty much every money related in Australia revolves around the financial year. Australia has key dates throughout the financial year that should be followed to avoid penalties and charges on late tax return lodgements.
Australia’s financial year, also known as the fiscal year, is a 12-month period that runs from July 1st to June 30th of the following year. This period, is the timeframe that businesses and individuals in Australia are required to submit their tax returns and pay any outstanding tax liabilities for.
Why is the financial year important?
The financial year is important for both individuals and businesses because it provides a well-defined period for them to review and assess their taxable income.
Most budgeting activities are also undertaken on a financial year basis allowing financial decision making and planning by keeping a close eye on earnings, expenses, and tax liabilities. The financial year also serves as a point of reference for assessing progress, setting goals and objectives, and making necessary course corrections.
This milestone is an opportunity to reflect on the previous financial year’s performance, identify areas for improvement, and implement the necessary changes to ensure continued financial stability and growth. As a result, the financial year is critical in financial planning, budgeting, and decision-making.
The financial year is significant for tax purposes because it represents the period during which income and expenses are reported to the Australian Taxation Office, allowing individuals and businesses to meet their tax obligations and avoid penalties. The financial year determines the timing of tax-related events such as the deadline for filing tax returns and the due date for paying taxes owed, or accessing your tax refund.
The financial year also has implications for other financial matters such as superannuation. Employers are required to contribute to their employees’ superannuation funds throughout the financial year, with the current rate set at 10.5% but is set to rise to 11% in July 2023.
The financial year also marks the release of the Federal Budget, which outlines the government’s plans for spending and revenue over the coming year. Generally the government also look at the tax rates at budget time and any rebates or levies they may wish to impose. This can have a significant impact on businesses and individuals, as changes to government spending and taxation can affect the overall state of the economy.
Key dates
Below are the key dates in the Australian financial year that individuals should be aware of:
July 1st: The financial year begins, and a generally any government policy changes come into effect.
October 31st: If you decide to file your tax return yourself without the help of a tax agent, or an online tax agent, this is the deadline.
May 15th: If you have a tax agent that you registered with before October 31st, this is the deadline for filing your tax return.
June 30th: The financial year’s end and the final opportunity for individuals and businesses to spend to create tax deductions to reduce tax payable or increase your tax refund. It is also the time when businesses must complete their employee payment summaries (PAYG Summaries).
Superannuation: This will be paid either monthly or quarterly by your employer. Individuals and businesses must be mindful of the critical dates above to take full advantage of available tax benefits. If individuals and businesses do not comply with their obligations to meet deadlines, penalties and charges may apply.
Are you ready for the end of the financial year?
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