With the end of the Financial Year fast approaching, now is a great time to look at your taxes to ensure you’re giving your business the best run for its money. We’ve outlined our top tips to help you reap the rewards now, and down the track.
- Business owner? Plan ahead!
If you’re a business owner, tax planning should be part and parcel to ensure you’re getting the best bang for your buck come the year’s end. And the good news is that tax planning in this day and age isn’t an expensive process.
Your business should be on the cloud and your books should already be in great order. At RBK, our business clients on a Fixed Price Plan automatically get tax planning built into their proposal. If you want to pay less tax and have more dollars in your pocket, then this planning meeting may well be your most important discussion of the year. We’ll run the numbers and advise on effective tax minimisation strategies. Basically, we save you money, and you’ll know your tax bill 11 months in advance! Magic.
- Consider tax deductible super contributions
Tax deductible super contributions could allow you to contribute up to $25,000 into superannuation before the 30th of June, so we strongly suggest you talk to a financial planner about this within the next few weeks, particularly when you consider the financial penalties for going over. For example, if you pay tax in the highest marginal tax bracket of 45%, you could receive a 30% benefit as contributions to super are taxed at 15%.
- Small business owners, rejoice!
If your cumulative annual turnover is less that $10 million you can access the SBE immediate asset write off on assets valued up to $20,000 that are purchased and installed ready for use prior to 30th June 2018. What’s more, an immediate deduction can be claimed for the extent that it is used for business. For example, a $19,999 motor vehicle that is used 75% for work could receive tax deductions from $15,000 – a simple step that will make a big difference.
- Review your structure (we’re looking at you again, small businesses!)
The ATO small business rollover provisions have made things much easier for small businesses to change structures. Therefore, if you are a sole trader or in a partnership it’s important to consider if you have outgrown your structure.
Not only should you be weighing up whether the company 27.5% tax rate is beneficial, but you also need to consider if your structure protects your personal assets. Disregarding this can pose risks – if you are in the wrong structure, your family home and other assets may be on the line if things don’t go to plan. Our team can help you ensure your business’ structure will serve you best in the future.
- Prepaying and preparing for expenses
If you’re looking to reduce your taxable income, then prepaying for certain expenses for the year ahead can be a great financial strategy. Interest and insurance are among the expenses you can prepay for.
Furthermore, if you’re planning to purchase any new equipment including things like stationary and uniforms, you can bring these expenses forward and lock in the tax deduction earlier – organisation at its best!
- Deferring or bringing forward income
Bring forward my income, you ask? That’s weird when we talk about tax planning and reducing tax, right? Wrong! Tax planning takes into account the future plans for the business. For example, if you’ve had a quieter year compared to previous years, but you’re confident things are likely to fire back up, you can bring forward your income into this Financial Year to help reduce next year’s tax.
On the other side, if this year has been large (and we hope it has!) you can look at deferring some of your income until after June 30th.
- Get your trust distributions right
Trust distribution resolutions must be made before the 30th June, and we strongly suggest you address this – seriously, it’s in your business’ best interest!
Trust distribution determines which beneficiaries will receive distributions and what portion of trust income they receive. Getting this right can save you thousands of dollars in unnecessary tax bills. Getting this wrong or not doing it at all can mean paying tax at 45%. Let’s be honest, no one wants to hand almost half of their hard earned money to the tax person! If you don’t have a trust involved in your structure, now is the time to discuss this with your accountant.
- Think about bucket companies
You might not have thought it, but bucket companies are a completely legitimate option for income from your trust. Think about it this way – if there are individuals paying tax at 37% or 45% marginal rates, then distributing to a bucket company at 27.5% capped tax rates might make more sense for your company. For example, a trust distributing $250,000 to two individuals can save almost $7,000 in tax by distributing some of the trust income to a bucket company – feeling swayed now?
- Just started a business? Deduct professional advice fees
Professional expenses associated with starting a new business, such as legal and accounting fees, are now deductible in the Financial Year the expenses are incurred. This was previously deductible over a five-year period – so it’s a good opportunity to look into this now! If you established a business during the Financial Year 17/18, you should speak to your accountant about claiming professional advice fees as an expense.
These tips are a starting point for you to consider ahead of the end of the Financial Year, but there are plenty of other strategies we recommend you take into account, from simply keeping all your work related receipts for expenses to being smart about your business’ assets by doing an accurate stock take and writing off obsolete stock.
Put your best foot forward for the new Financial Year and get in touch with us to look at all your options.