This last financial year has absolutely flown by and tax time is here again. If you want to avoid paying more tax for your small business than you really need to, then these top 10 tax time tips are for you!
1.Learn about Small Business Concessions
As the biggest employer in the country, small businesses are super important to the Australian economy. According to the Council of Small Business Organisations Australia (COSBOA), there are more than 2 million small businesses in Australia employing over 4.7 million people. Just how important small business is to Australia is reflected in the many incentives and tax breaks the government offers.
Small business tax concessions are an example of these tax breaks, and learning what they are and how to apply them is one way small business owners can minimise their tax liability. The following are some important small business concessions that you need to know about:
The instant asset write-off
If you own a small business with a turnover of less than $10 million, you can immediately deduct the business portion of most assets. The threshold has increased from $20,000 to $30,000 for each asset, and access to this concession has been extended to June 30th 2020. Now is a great time to look into the instant asset write-off and make the most of the next financial year!
The ATO understands that running your own business is expensive, so they allow small business to claim some running expenses as tax deductions, including the business expenses you pay for in advance. In fact, prepaying expenses before June 30 can increase your allowable deductions for the financial year.
For an expense to be eligible, it must have a service period of 12 months or less, like an annual policy, utility bill or professional subscription. If you claim them this financial year, it will likely reduce your allowable expenses for the next financial year.
Capital Gains Tax (CGT) exemptions
When you sell a capital asset, you will usually make a capital gain or a capital loss. When you make a capital gain, it is added to your assessable income and may significantly increase the tax you need to pay. However, when selling assets related to your small business, there are four concessions that allow you to disregard or defer some or all of a capital gain. Head to the ATO website to find out more about the CGT help available to eligible small business.
2. Give your business regular tax health checks
Are your financial records and systems in order? It’s important to check in regularly with your business finances to make sure everything is up-to-date and running smoothly. If you don’t check on your business tax health regularly throughout the year, it’s much more likely that you’ll make mistakes your Business Activity Statement (BAS) and run the risk of incurring ATO fines.
3. Don’t be afraid to face your tax debt
If you’re in a tight spot and worried about you tax debt, it’s not as scary to deal with as you might think. Letting the ATO know means they can help lighten the load and reduce your stress at tax time. If you’re still not ready to face the ATO directly, feel free to have an obligation-free chat with your local Gold Coast small business tax specialists at ABA Tax in Southport. We’re here to help simplify your tax, no matter what situation you’re in.
4. Check you’re paying the correct company tax rate
The small business company tax rate is now 27.5%. The 27.5% rate will remain the same for the 2019-20 financial year, however, the base rate entities turnover threshold will rise to $50 million. The small business tax rate will then reduce to 25% by the 2021–22 financial year. If you want to get the maximum legal refund this year and in the future, it’s essential to develop a strategic plan that deals with the small business tax cuts taking place over the next few years.
5. Make the most of your business debt
How are your loans currently set up? Did you know there is an optimal way to manage each and every debt, which allows you to claim more on your interest deductions? Talk to your small business tax specialist to discuss a more effective way of setting up your small business debts.
6. Know your eligible deductions
When it comes to claiming deductions, you not only need to spend money to make money, but you also need to keep your receipts to prove you’ve spent money to keep your business running.
Although many business owners make the mistake of inflating their deductions and claiming for things they shouldn’t, a surprisingly large number also miss out on deductions they are eligible for. Below are just a few of the many deductions you may be able to claim, but it’s important to talk to your small business tax specialist to discover the unique list of deductions that apply to you and your business. However, almost every small business will be able to take advantage of these deductions:Advertising and sponsorship
- Accounting and business tax specialist fees
- Bad debts
- Borrowed money
- Business Travel
- Car expenses
- Employee fringe benefits
- Equipment (depreciating assets)
- Phone bills
- Repairs, replacements and maintenance
- Super contributions
- Salary and wages
- Working from home expenses
7. Stay up to date with Super changes
As a small business owner, you’ll know that all employees and most contractors are eligible for super payments. Currently your must pay a minimum of 9.5% of an employee’s ordinary time earnings, at least four times a year by the quarterly due dates. Always check that you’re paying the right people, the right amount, to the correct super funds before the deadlines, and stay up to date with all things super via the ATO’s super for employers information page.
Remember that all employers must use SuperStream to pay super electronically, and that keeping records to prove you’ve met your super obligations is a must!
8. Keep digital records
It’s not just super payments that require a digital record. If you still keep paper financial records, it’s time to take the environmentally friendly approach and shift to digital record keeping; even your physical dockets and invoices should be scanned and stored electronically. Real-time, cloud-based accounting software is the next generation of business functionality, which is why ABA Tax has partnered with Xero.
9. Lodge on time
The Australian financial year ends on June 30. You have from July 1 until October 31 to lodge your tax return yourself for the last financial year. Don’t worry if you do miss the deadline though; ABA can help.
We understand that as a small business owner, you’ve got a million other things to deal with, and unlike us, tax probably isn’t your thing. Sometimes things just don’t go to plan; we’re here to simplify your life when it comes to late lodgements.
10. Always plan ahead
Strategic planning is critical to success in all aspects of running a small business, including your tax. Tax considerations should definitely be part of your business plan, so it’s always a good idea to meet with your small business taxation specialist well before the financial year ends.
However, if you’ve left the planning side of things a little late for June 30 2019 (yes, by now it’s definitely too late to plan for this end of financial year!), don’t worry; this is the perfect time to develop your small business tax plan for the financial year ahead. For a free consultation and analysis of your unique small business tax needs, get in touch with ABA Tax before another financial year slips by in the blink of an eye!