End of Financial Year 2016 is here! How do you feel about your past 12 months? If you’re a business owner, June is a good time to take a review of how you are going. If you’ve got some tax questions about your individual situation, you might be better off having a meeting with your accountant than just reading through these tips. But if you’re after some quick accounting ideas to save tax this year, you are in the right spot!
Brace yourselves! Tax tips are coming!
Review your trade debtors/accounts receivable and write off any old debts that you don’t expect to collect. That way, you don’t pay tax on money you’re unlikely to recover. The best part about this is you get a deduction without having to pay a cent! - If you are a business that keeps an inventory, you can do something similar with that. If you have goods that you are no longer able to sell or have been damaged in some way, you can write them down or off and take that as a deduction. No need to let your losses go to waste!
Superannuation isn’t due until 28 July, but it’s only tax deductible when actually paid. Therefore, you can get an easy deduction this year by paying your employee’s super prior to 30 June. This is helpful because you were going to have to pay it anyway, but by moving it forward you save tax now!
Additionally, you can contribute to your own superannuation! Personal super contributions will be the only deduction that you can take by moving money from one of your pockets to another. However, it is important that you check with your accountant about how much you can contribute because you don’t want to breach your contribution cap!
For small businesses, prepay expenses prior to 30 June. You can take a deduction this year if what you are paying for is going to be provided within the next 12 months. If you were going to need to pay for it anyway, no need to wait until the 2017/2018 year to claim back the tax for it! - Similarly, usually you can’t claim a full upfront deduction for a purchase of an asset that you will use for more than a year. But the ATO has allowed small business to claim a deduction up front for up to $20,000. That means if you are having a good year and you need more equipment to keep growing, you could finance the purchase of a medium-large asset (almost everything but a vehicle). You could then claim the full deduction before you even have to pay for it!
If you are using a motor vehicle for work, the single best thing you can do is complete a logbook! For 12 weeks you need to track your work-related kms traveled and then divide that by the total driven over that time. Without spending anything you will start saving income tax and GST that you would have had to pay in order to avoid the worst case scenario of paying FBT!
Similar to a motor vehicle, if you have a building you use for business or rent out, you need to get a building depreciation report completed. You will be able to claim depreciation, one of the special expenses that you don’t need to pay cash to claim! And if your building is new or renovated, those deductions can be massive!
Those are your tools, now for how to use them!
Most of those ideas revolve around the idea of deferring tax until next year. And they can be used indefinitely to defer each year’s tax until the next year. Ideally, you could follow these until you had a down year where it wouldn’t matter if income was slightly higher. Then you could re-up your deferrals in a better year when you could really use it!
For more handy tax hints, or to book a last minute Tax Planning meeting, get in touch with our office. We’d love to help!