Q. We have recently completed our end of financial year management accounts. We expect there will be additional adjustments still to flow through before we finalise them. We are fairly busy at the moment with current year work and would prefer to leave the wrap up of our financial statements until later this year. Our accountant is pushing us to finalise some of these end of year adjustments. Why all the rush?

A. This is probably a good question to ask your accountants. They would have a better idea of your reporting requirements. Your tax returns certainly will not be due until later in the year or next year. The exact date depends on your entity structure, your size and your past tax history. There are however other reasons why you may need to complete your financial statements at an earlier time.

Your June quarter Business Activity Statement, is most likely due at the end of August. This statement together with those lodged for the earlier quarters of the financial year provide the Tax Office with a high level summary of your income, taxable transactions, purchases and payroll expenses for the year. One of the audit methods open to the Tax Office is to compare your final accounts and tax return with the aggregated information that you have declared in the business activity statements. Where there are major discrepancies this could trigger audit activity. Your accountant may be keen to ensure that your end year position lines up with your Business Activity Statements. The difficulty with agreeing any significant changes to your accounts later in the year is that this may require Business Activity Statements to be amended. Again this can trigger audit activity.

You may also have financial reporting requirements with your bank. If you have borrowings there could be covenants in your loan agreement requiring you to provide the bank with certain financial information or a copy of your end of year accounts within a prescribed time period after year end. This is often within 90 days of year end. Last year some business owners received reminders from their bank that all loan covenants needed to be met to ensure continuity of loan arrangements. If this is the case you want to keep the bank on side.

Equally your accountant may want to ensure that you have your financial statements finalised early in the new financial year to ensure that you have a clear picture of your trading position and are able to quantify your forward tax liability.

There are a number of reasons why having your financial statements finalised early in the year is a good idea. Speak to your accountants and find out what the issues are and then agree a timetable with them that works for the business and your compliance requirements.