Business owners, it is now the time of year when you need to be reviewing the position of your business and looking at strategies to minimise your tax payable.
Tip: Avoid spending money just to get a tax deduction. Assuming a small business entity with a tax rate of 27.5%, for every dollar you are spending, it still costs you 72.5c - and if this isn’t something you need - then you are wasting your money.
That aside, let’s look at a few common strategies that you can implement in order to save money this tax season.
1. Instant Asset Write Off
Businesses that are a “Small Business Entity” with a turnover of up to $10 million can claim a deduction for each asset purchased and first used or installed ready for use, up to the following thresholds:
$30,000, from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020
$25,000, from 29 January 2019 until before 7.30pm (AEDT) on 2 April 2019
$20,000, before 29 January 2019.
2. Write Off Bad Debts
It’s not something that we want to accumulate as business owners - but review your current accounts receivable and write off any bad debts before 30 June.
3. Pay Employees Superannuation
Did you know that superannuation is not available as a tax deduction until it is paid? If you want a tax deduction in the 2019 financial year for your June Quarter Super make sure that you pay it before the end of this month*.
*Refer to your clearing house for advised processing times to ensure contribution received by the fund before 30 June and only available to superannuation paid on time.
4. Review unearned income
This is potentially a huge timing win with tax. You can exclude any income that you have received but not yet earned. Make sure you review your sales for any upfront contract values that you may have received and defer them until next year.
5. Personal Superannuation
Personal superannuation contributions may be available but seek advice from your financial planner to discuss your contribution limits.
6. Donations
As long as you are profitable, you can claim a tax deduction for a donation, provided that you donating to a registered charity with the ATO.
7. Review your stocktake
Write off any stock that is damaged or obsolete. Complete an inventory stocktake and value the stock at the lower of the cost or the sale value.
Bear in mind the circumstances under which the above strategies can be applied are not applicable to all taxpayers, so please consult with us first.