With the 30th June soon approaching, so does the need to think about tax time issues for small business owners. Here are our top tips to help you make the most out of this end of financial year:
1. Pay and clean up any super owing before 30 June Businesses must ensure they are paying employees additional superannuation. As superannuation is not tax deductible until it has been paid, it is also important to ensure all superannuation payments owing are completed before 1 July, this is a great way of reducing your income tax bill. Business owners should be aware of the cash flow implications of the change and make plans accordingly.
2. Be aware of relevant tax changes It is critical you are aware of any relevant tax changes which typically come into effect at the start of a new financial year. Start by consulting your financial adviser or accountant. This will ensure you are well positioned to either capitalise on a positive change or prepared for an adverse change. Forewarned is forearmed.
3. Get your tax-deductible expenses in order An easy way for SMEs to claim tax deductions is to pre-pay relevant services and supplies such as office supplies or costs for supplier services, such as accountant fees, up to a period of 12 months or less. By bringing forward tax-deductible expenses and deferring income, you can reduce your taxable income for the financial year. Approach your suppliers now for all invoices made up to 30 June and organise payments arrangements to secure a great number of tax deductions.
4. Be aware of all applicable tax benefits
Any business with a turnover of less than $2M is eligible for a wide range of tax benefits within areas such as Capital Gains Tax, Income Tax, Goods and Services Tax, and Fringe Benefits Tax. So make sure you are aware of any tax benefits that may be applicable to your business. This is especially important for small to micro business owners.
5. Know the value of your depreciating assets Another tax opportunity for SMEs with a turnover under $2M are available tax deductions on any depreciating assets up to the value of $6,500, purchased before 31 December 2013. Business assets which may fall into this value category include office equipment, computers, printers, work tools, etc. Make sure you keep track of assets within this value category for potential tax deductions.
6. Keep your income producing assets up-to-date You can reduce operating costs, increase productivity and free up cash by structuring your financing and repayments to suit your tax and cash flow needs. Make an effort to keep your income producing assets up-to-date, as this helps keep your business operationally efficient and maximise cash flow.
7. Write off bad debt According to the latest Dun & Bradstreet Trade Payments Report, the average number of days business-to-business payments being made has increased, now sitting at an average of 56 days. If you’re still chasing invoices from the last financial year, now the time to write them off. Bad debts are tax deductible and can be used to offset your taxable income.
8. Reassess your cash position Starting the year with a healthy cash position is crucial. Ensure you review your cash management processes and consider the most appropriate funding solutions. There are a number of cash flow finance tools to help you better manage cash flow and funding. Debtor finance is gaining in popularity as it provides advances of up to 85% against receivables without needing real estate security, and is scalable in line with the sales growth of the company.
9. Have an accounting spring clean As a number of tax and superannuation changes take place from 1 July onwards, make sure you review and update your accounting systems to include these changes; as you do not want to have to back pay items such as missed super contributions or lose other potential tax saving opportunities next end of year financial year.
10. Reward your staff End of the financial year is always a good time to reward your hard-working staff and thank them for their contribution to your business. Take them out to lunch or consider rewarding them with a small bonus. It may also be a good time of year to review their KPIs and present your refreshed business and marketing strategy.
This information is current as at 08/06/17. This article has been prepared by Heart1Stop, a social media brand owned by Heart Mortgage Services and Heart Financial Advisers. The information contained in this article is an overview or summary only and it should not be considered a comprehensive statement on any matter nor relied upon as such. The views expressed here are not those of Heart1stop, Heart Mortgage Services, Heart Financial Advisers, shareholders, directors or staff and associated contractors and business associates. This article has been prepared without taking into account any person’s objectives, financial situation or needs. Because of this, you should, before acting on any information contained in this article, consider its appropriateness, having regard to your objectives, financial situation or needs. Any taxation information contained in this article is a general statement and should only be used as a guide. It does not constitute taxation advice and is based on current laws and their interpretation. Each individual’s situation may differ, and you should seek independent professional taxation advice on any taxation matters. While the information contained in this article may contain or be based on information obtained from sources believed to be reliable, it may not have been independently verified. Where information contained in this publication contains material provided directly by third parties it is given in good faith and has been derived from sources believed to be accurate at its issue date. It is not the intention of Heart1Stop or Heart Mortgage Services and Heart Financial Advisers that this publication be used as the primary source of readers’ information but as an adjunct to their own resources and training. To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up to date or fit for any purpose; and no party of Heart1Stop or associated entities as mentioned is in any way liable to you (including for negligence) in respect of any reliance upon such information. This article may also contain links to websites operated by third parties ("Third Parties") who are not related to Heart1Stop. These links are provided for convenience only and do not represent any endorsement or approval by us.