Tax Time Tips: Small Business Tips for the closed financial year
Now that we’re into a new financial year, you’re probably still cleaning your books to meet with your Accountant and talk about your tax liability for last year.
Here are 7 simple tips that might perhaps help you to reduce your taxes payable.
1: Remember to make the most of depreciation deductions
As an eligible Small business enterprise (SBEs) you stand to receive an immediate tax deduction for almost all individual business assets bought before 30 June 2018 costing less than $20,000 (ex GST for those registered for GST). The assets, however, must have been equipped and installed by the 30th of June this year.
Assets that are not immediately deductible as mentioned above would be automatically depreciated at a flat rate of 15% in the first year of purchase for as much as it was used for producing income.
Although not as yet confirmed, the immediate tax deduction rule may be extended until 30 June 2019.
2) Ensure you’re paying at the correct tax rate
Trading SBEs with an annual turnover below $25 million will pay a 27.5% tax rate. SBEs set up purely to receive passive income, however, they will pay 30% even though their annual turnover may be lower than $25 million. Consult your tax professionals to find out more.
3) Remember to pay any outstanding Superannuation Entitlements
With a 12-month amnesty period announced by the Australian Government for outstanding Superannuation Guarantee (SG) contributions prior to 1 April 2018, employers who disclose previously undeclared SG shortfalls during the amnesty before the 31st of October (self lodgment deadline) or the 15th of May (registered agent deadline) and before a SG audit will not be liable for administrative penalties.
Furthermore, SBEs will be able to claim a tax deduction for payments made during the 12-month period. It must be noted though that the announcement is subject to approval by parliament.
4) Consider writing off Bad Debts
If available, this strategy can work to reduce your income tax liability. There are however a number of conditions that must first be met. To be able to claim this deduction, the bad debt must still exist at the time it is written off and must be effectively unrecoverable. It must also be written off in the accounts as bad in the year the deduction is claimed. Consider discussing this with your accountant to see if it is an applicable option for you.
5) Review your Legal Structure – Is it right for your business?
As an SBE, you can change your legal structure at any point during the year. While this may incur additional costs, it may also have potential benefits in terms of massive tax savings. Caution must, however, be exercised during business restructuring as it may be a complex exercise and may give rise to additional tax liabilities if not done correctly. It is advised, therefore, that you have a discussion with your accountant when choosing the right strategy. Fortuna specialises in structuring and may be able to help in this regard. Should you need assistance, give us an obligation free call at 9240 4211.
6) If you’re a start-up, start up with the correct structure; it’s important!
Structuring your business strategically can have long-term tax-saving benefits and could save you from incurring restructuring costs or suffering higher taxes. Have a chat with your accountant on the best tax-efficient structure to adopt that suits your specific organisation.
To have a bit more perspective on the various structure options, listen to Dinesh, our MD: Video on Company Structures
7) Make use of available accounting packages
Accounting packages such as Xero, Quickbooks and MYOB can lead to a more organised set of accounts and make it easier to take your next step in business. Structured and well-organised books help accountants do their job far better as well. There are many applications out there and there are also offers that come out from time to time; to understand which one suits your business the best and to know about the ongoing offers, give us a call and someone from our bookkeeping team can assist you.