How Small Business Owners can pay less Tax this year?

tax return time-2

Everyone wants to pay less tax right? But we want to make sure you are doing it legally! So here is our top tips on saving on your tax this financial year. As a small business owner there are more opportunities for you to save on your taxes.

The Azure Group’s Top 10 tips you can implement to minimise or defer the amount of tax you will pay this financial year if you run a Small Business.

1. Claim before spending

You can actually claim for things that you haven’t spent yet but have been ‘incurred’ before June 30. These can include things such as staff bonuses, commissions and directors’ fees that are owed to the employees and the business is committed to paying. You can also claim repairs and maintenance that have been undertaken and billed before June 30 but haven’t been paid yet.

2. Defer Income

Consider holding off sending customer invoices till July 1. You need to keep in mind how that might affect the next financial year, but if you were close to a tax bracket for this year, then it might be worth deferring enough income to stop you going into the next tax bracket.

3. Bring forward payments

If you have known expenditure that will be incurred after June 30 consider paying it now, in advance under the prepayment rules. This might include rent, staff training, office supplies, insurances, subscriptions and donations.

4. Pay the June quarter superannuation

Superannuation is deductible when paid. The June quarter payment is due on the 28th July, so why not bring it forward a month and pay it before June 30 and that way you can claim it now rather than waiting a whole year.

5. Use the superannuation cap

Putting money into your superannuation is a great way of reducing your tax bill. If you are wanting to increase your retirement plan then you should be contributing as much as you can into your super up to $25,000. Make sure you don’t exceed the super contribution caps.

6. Stocktake

The value of your closing stock on June 30 affects your overall business profit. If you do a full stocktake before June 30 you can remove any obsolete or out of date stock that you can no longer sell. Writing it off before June 30 will mean that it won’t count as an asset for your taxable profit.

7. Write off bad debt

If you have a client that you know is never going to pay then make sure you write this off and account for it in your accounting before June 30. This way you won’t be taxed on this income. You do need to show that you have made a genuine attempt to recover the money so make sure you keep records of emails, calls or letters sent in your files.

8. Capital Gains Tax (CGT)

Minimising CGT is imperative. If you have a capital gain, do you have another asset that is making a loss that you can sell to counter the gain or can you defer the exchange date? Do you qualify for any capital gain rollover concessions? If in doubt about how to handle this make sure you get some advice.

 9. Donations

If making donations before 30 June, remember donations are only deductible to the not for profits with DGR Status.

10. Immediate Asset Write off has now increased to $30,000

The threshold has increased to $30,000, and has been extended to 30 June 2020. 

The instant asset write-off now also includes businesses with a turnover from $10 million to less than $50 million. These businesses can claim a deduction of up to $30,000 for the business portion of each asset (new or second hand), purchased and first used or installed between 2 April 2019 and 30 June 2020.

Businesses with a turnover of up to $10 million can also claim a deduction for each asset purchased and first used or installed ready for use, up to the following thresholds:

  • $30,000, from 2 April 2019 until 30 June 2020
  • $25,000, from 29 January 2019 until 2 April 2019
  • $20,000, before 29 January 2019.

You can make a big difference in your tax, however, they need to be assesses against your business and your individual cash flow requirements. Make sure you get advice and support before implementing these strategies, and remember any money you spend on your accountant for tax planning can be claimed as a tax deduction!

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About Author

Tanya Moran
Tanya Moran

Tanya Moran is a Senior Partner and the Lead Taxation Partner of Azure Group. She has more than 20 years' experience working with a large array of businesses from small accounting firms to large international corporations.

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