We are coming to that time of year where we begin to look ahead to the upcoming annual tax season. However, after a particularly strange year in the global economy, and with a small amount of uncertainty moving forward, most of us in business would prefer more cash in our own pockets right now. Here is what Victor wants you to consider in relation to Tax planning to benefit your business this annual tax season.
What is Tax Planning and what are the benefits of this practice?
Tax Planning is about ensuring you can meet your taxation obligations come the end of the tax year. But there are many other benefits including estimating the amounts of tax installments and when they will be due, reviewing your superannuation plan and how it will affect your tax, along with developing strategies and plans to grow your net profit.
Tax Planning is done with a Comparison Planning method, in which your current financial position is compared against the previous couple of years and a realistic estimate of your potential end of year liability is created. With this estimate, you are then able to determine what can be done to minimise the amount payable. Things such as:
- Machinery & Equipment Upgrades – Maybe you have been thinking of upgrading some equipment but know that the full cost is not always immediately deductable, but rather depreciated over several years. But did you know that assets such as machinery and equipment purchased for under $1000 are considered an instant deduction?
- Prepaid Expenses – Pay attention to your future expenses and consider whether these can be prepaid. While the general rule is that expenses can only be claimed in the year they are incurred, if you are a small business entity, you may be able to apply the Prepayment Rules. This could mean that up to 12 months of the next years expenses can be claimed in the current year. There are strict rules around this though which must be considered. View them here.
- Writing Off Bad Debtors – You may wish to consider writing off any unrecoverable debts. If these are written off prior to 30 June, they can be used to reduce your income tax.
- Voluntary Superannuation Contributions – Making additional voluntary superannuation contributions can also be used to reduce the amount of tax payable.
- Small Business Concessions – There are also several concessions that may qualify as an immediate deduction.
Due to the complicated nature with some of these Tax Planning tips, we highly recommend scheduling an appointment with your accountant to discuss the specific benefits to your business.
After all, we all want to minimise the amount of tax payable, right?
At VBA we specialise in strategic tax advice, offering tax and financial reporting for individual income earners, family businesses, tradies and construction companies.
Victor Bimrose Accountancy Pty Ltd (ASIC No. 1259423) ABN 53 010 957 294 is a Corporate Authorised Representative of Merit Wealth Pty Ltd ABN 89 125 557 002, Australian Financial Services Licence Number 409361.
Mark Foxley-Conolly (ASIC No. 1259421) is a Limited Authorised Representative of Merit Wealth Pty Ltd ABN 89 125 557 002, Australian Financial Services Licence Number 409361
General Advice Warning: This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.