If you own or manage a business, then tax is something that you’ll inevitably have to deal with. While it might not be the part of the business that you’re most passionate about, ensuring you comply with the relevant tax law and doing everything you possibly can to legally reduce your tax burden is vital if you want to run a truly successful operation.
As with most things in business, getting your tax right shouldn’t be something that you approach in a haphazard manner. It’s important to approach things in a methodical manner and have a well-thought-out plan in place. Establishing good financial habits – like formulating a tax plan and sticking to it – is bound to have a positive impact in both the short and long term.
If you don’t think that you or anyone else in your business has the expertise to properly formulate such a plan, there are lots of business advisors in Perth that can help you out with this.
Tax time can also be a great occasion to set new goals for the financial year ahead. If you’re looking for ways to improve your tax planning preparation, make sure you check out the following 5 pieces of business tax advice. You might be surprised at how big an impact they can have!
1) Know The Small Business Concessions
As we mentioned before, knowing the various ways that you can legally reduce your tax burden is a huge part of formulating a successful tax plan. It helps you find your cashflow sweet spot between paying tax and spending money to reduce your tax burden.
If you qualify as a small business, here are a number of tax concessions that you should be aware of:
- Instant Asset Write Off: has recently increased from $25,000 to $3000.
- Immediate Deduction for Business Start-Up Costs: if you’ve set up a small business in the previous financial year, you may be entitled to a deduction for any professional fees and/or legal fees incurred.
- Prepay Some Expenses: As a small business, you’re entitled to claim a deduction for any prepayment of expenses up to 12 months in advance.
2) Pay Superannuation Ahead Of Time
Claiming a deduction for super contributions is hugely important. To enable yourself to do this, ensure the super is paid before the due date for each quarters’ payment.
If you want to be able to claim a deduction for super owing in June, it’s best that it’s paid before the end of the month in order to obtain the deduction that financial year.
3) Identify Any Bad Debts
Tax time is a good time to review your receivables/debtors in your business. If you’re still chasing unpaid invoices from the previous financial year, this is the time to write them off to be eligible for the tax deduction.
Note: you need to make GST adjustments for these written-off amounts.
4) Make Sure Your Documentation Is In Order
It’s not uncommon for business owners to take money from their business that isn’t done via wages or a dividend. If this is the case, it’s very important to have the right documentation in place to help you avoid paying unwanted taxes.
5) Do A Thorough Stocktake
While it might be a time-consuming and somewhat tedious task, performing a thorough stocktake is essential for determining the correct value of your closing inventory.
It’s also a good way of identifying any obsolete or damaged stock that your business might be carrying. This stock can be written-off or reduced in value for tax purposes and claimed as a deduction.
When valuing your stock you can choose from three different methods: cost, replacement or market sale pricing. Choosing the lower value is a great way to reduce your assessable income and minimise your tax burden.