If you own a business, you would know the hassle you go through during the tax season. Gathering all the information for lodging your business tax return alone is a tough ordeal, apart from going through the actual hassle of filing.
So, let’s discuss some important tips that can help you save valuable time and money in the next tax season.
Claim Asset Depreciation
If your business has a gross annual turnover of less than $10 million. You can claim an instant asset write-off on any asset up to $20,000. It means that you can make an investment in an asset of up to $20,000 before June 30. Then claim back the entire amount in your tax return. That way, you can reduce your taxable income by the price of the asset.
Tools of Trade
As a business owner, purchasing Tools of Trade and any other FBT exempt items is an effective way of buying equipment with tax benefits. Items that are packageable include computer software, portable tools of trade, personal electronic organisers, notebook computers, briefcases, mobile phones, digital cameras and protective clothing.
On proper structuring, you as an employer will be eligible for a tax deduction for reimbursing payment to an employee for the cost of the equipment and claim any GST input credit. The reduction in the salary package of the employee also will only be by the GST-exclusive cost of the purchased items.
Defer Income
During the tax season, you should try to maximise the expenses and minimise the income of your business to reduce the assessable income and tax. You can achieve this by correctly timing your earnings and expenses. Such as you can defer income into the upcoming financial year.
Although you will still have to pay tax on your earnings. Meanwhile you can save a significant amount of money to use it effectively as of now. For this, it is advised you use accrual accounting instead of cash accounting.
You should consult small business tax return tax consultants to know about the relation between your income and business tax returns in detail.
Maximise Deductible Super Contributions
Pre-tax superannuation contributions, also referred to as concessional super contributions, are taxed at a 15% rate, which is lower than your company tax rate and income tax rate, and you can claim a deduction on these contributions.
The concessional superannuation contributions cap is $25,000 for all individuals irrespective of age. So it is recommended you make reasonable contributions up to this limit by June 30.
However, remember that super guarantee contributions are also included in these caps. If a concessional contribution is made and it exceeds these limits, the excess will be included in the assessable income and taxed at the marginal rate, including an excess concessional contributions charge.
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Hire a Tax Accountant
Hiring a professional and experienced tax return accountant is one of the best decisions you make. Tax accountants are well-versed with the tax regulations, and the latest changes brought about by your government. Also, they can advise you on several tips and tricks to maximise your tax deductions and ensure you don’t miss out on any significant claim amount.
They also save you valuable time and keep you from the hassle of filing your tax returns. So that you can focus on other important areas of your business.
Expenses Not Paid by EOFY
You can claim deductions for some expenses even if you have not paid them by the EOFY (end of the financial year). The expenses include:
- Staff wages and salary: claim the number of days your employees have worked for up to June 30 but haven’t been paid until the new tax year.
- Staff bonuses: claim a tax deduction for the staff commissions and bonuses that are owed and unpaid on June 30 if you’re committed to paying the expense.
- Repair and maintenance: claim repairs and maintenance conducted and billed by June 30 but not paid until the next financial year.
Private Company (“DIV 7A”) Loans
As a business owner, if you have borrowed funds from your company in previous years. You must ensure that the proper principal and interest repayments are done by June 30.
The current year loans just either be paid back in full or at least have a loan agreement entered in prior to the due date of lodgment for the company return. Otherwise, you might have a risk of having it deemed an unfranked dividend in your return.
Maintain a Business Motor Vehicle Logbook
You should try to maintain a complete and accurate motor vehicle logbook for at least a period of 12 weeks. The start date of this 12-week period must be on or before June 30. You should keep a record of your odometer reading as of June 30 and maintain all the receipts of the motor vehicle expenses properly.
You can try an alternative where there is no need for a logbook by simply claiming up to 5,000 km based on a reasonable estimate using the cents per km method.
Write off Bad Debts
You can claim a tax deduction on your bad debts. if you are able to show that the debts have been written off before June 30. If the debts were originally shown as earnings. Include your decision in writing, like in meeting minutes. Which you can then use as evidence that your debts were written off before the end of the financial year.
Write off Obsolete Stock
If your company holds stocks, review your stock valuation and write off any stock that is obsolete or damaged. Consider preparing a detailed stocktake and/or work in progress listing as of June 30 and bear in mind. That your stocks can be valued at either net realisable value (expected selling price) or cost price, whichever is lower.
Final Words
If you are a small business owner in Perth, you should always get in touch with an expert tax agent Perth who can help you smoothen your tax return process.