June 30 is the last day of the financial year in Australia. This makes it a very important date for personal financial planning.
Unfortunately, in 2019, it’s Sunday’s turn to host June 30. In many ways, that makes June 28 the effective end of the current financial year. Last week, we showed you a checklist that you can use to ensure you get everything done the needs to be done before the end of June. As of today, if there are still things you haven’t done, you’ve left things very late. But there may still be time, so please head back to last week’s article and make sure that you have done everything that is possible to do before the financial year ends.
Many people are puzzled as to why the financial year is not the same as the calendar year. In fact, the two couldn’t be more different: the financial year ends exactly halfway through the calendar year. Or, as we financial advisers prefer to put it, the calendar year refuses to be in sync with the financial year. But why, exactly, does Australia’s financial year end on June 30?
In simple terms, it’s a product of Federation. If you know your Australian history, you will know that in 1901 the Commonwealth of Australia was born out of the Federation of six separate colonies – each of what we now know as the states. Our federation was actually achieved by an Act of the British Parliament – as each of the colonies was a colony of Great Britain at the time. This Act of the British Parliament includes the Australian Constitution. Interestingly, Australia’s Constitution actually includes an opportunity for New Zealand to become part of the Commonwealth of Australia. New Zealand chose not to join us in 1901, and despite the chance to make Australia’s rugby team a worldbeater, that choice is probably now permanent.
Prior to Federation, each colony actually had its own parliament. Each colonial parliament had a Treasury Office which reported to it. Parliamentarians preferred not to work over the summer and Christmas period, which is when the calendar year ends. So, there was no point in the treasury office reporting to Parliament as of 31 December: everyone was on holiday. Instead, most treasury offices picked a time that they knew Parliament would be sitting – right in the middle of the calendar year, when the weather was cold and the days were short.
Because the colonies were all using a June 30 reporting date, the Commonwealth simply followed this practice upon Federation. So, in a very real sense, we have a July to June financial year so as not to interrupt parliamentarians’ holidays.
Other countries use different dates. In the US, the financial year ends on 30 September. Of course, Australia could never use that date, given that it would sometimes clash with various football grand finals. In the UK, the financial year ends at the end of March. Presumably, their parliamentarians also wanted to get all their work out of the way before they went on summer holidays. Most continental European countries use the calendar year for their financial year as well. Very specifically, Iran ends its financial year on 21 March. Canada tries to have things both ways: the government’s financial year ends on 31 March, while individual taxpayers use the calendar year. New Zealand, Australia’s long lost seventh state, also uses a different financial year for government and for taxpayers. Government use the same financial year as we do in Australia, while taxpayers finish things up on March 31.
Just another reason why the Wallabies will never wear all black.