Don’t wait until after the end of the financial year to think about tax for your small business. By then it will be too late to consider a range of legal options to avoid paying more tax than you are required to.
Questions to ask before 30 June…
1. Could you take advantage of the $20,000 instant asset write-off to reduce your tax bill?
If your turnover is less than $2 million per year you may choose to use the ATO’s simplified depreciation rules, and up until 30 June 2017, that means you can access an immediate write off for assets up to $20,000 (i.e. you can deduct their full cost in the year you buy them).
What about assets costing more than $20,000, I hear you ask? You can pool them in a small business asset pool and claim a 15% deduction in the first year and a 30% deduction each year after that. Then when the balance of your small business pool drops below $20,000, you can write it off.
So if you are contemplating buying or upgrading equipment, think about doing it before 30 June.
2. Should you do a stock-take?
If you have stock in your business, now is a good time to value it, as it is part of your assessable income. Consider identifying any obsolete or old stock and re-valuing it to its correct value. Individual items of stock can be valued at cost, market value, or replacement value. Other assets that have become obsolete may also be written off.
3. Do you have any invoices that you know won’t be paid?
Income tax is payable on all invoices issued, even if you haven’t been paid, but the last thing you want to do is pay tax on an invoice you know won’t ever get paid. Review the list of those who owe you money and write off those bad debts before the end of the financial year.
4. Are you planning to pay employee bonuses?
Bonuses to employees are deductible when the business has committed to paying them (so that payment is not subject to discretion). If you finalise and sign off on the bonuses to be paid you can reduce this years’ tax even if you plan to pay after 30 June.
5. Are your lease repayments up to date?
Make your lease repayments before 30 June to ensure a deduction can be claimed this financial year.
6. Should you bring superannuation contributions forward?
Superannuation is deductible when paid (assuming it was paid on time). You have to pay the 9.5% superannuation by 28 July, but you could bring it forward a month. Pay it before 30 June and you can claim the deduction this financial year.
7. Are you running a car for business use?
Make sure your log books are up to date and represent the car’s business use.
8. Could you defer some income?
How are your cash flows? Could you defer some invoicing until 1st July? If the income was not invoiced this financial year, it can’t be taxed this financial year.
What are your thoughts?
Do you have any hot tax tips for small businesses? Join the conversation — leave a comment below and let us know what you’re thoughts are.