Hi, I set up my own contracting business in April this year and have quite a bit of money owing with invoices due to be paid. When I left my old job in March I had quite a bit of holiday pay owing and paid more tax than normal so if the money owed to the business comes in after 30 June will it need to be included in this year’s tax returns as the invoices were dated pre 30 June?
You can elect to have the business taxes on a cash basis under the small business format. This will be the same for accounts you owe as well, and will generally be a long term decision.
Check with your accountant, who can generally run some projection and tax planning numbers to help you decide.
most small businesses elect to report their business actvity ona CASH basis. ie you declare ONLY the income that you receive, and only claim the expenses you pay by 30 June.
this is not a bad idea, because the idea is to match your tax liability to your cashflow. Also if you have a bad payer, you dont really ever want to pay tax on something you are never ever likely to see:)
And listen to Todd: go to your bean counter and run the numbers BEFORE 30 June