Tax Saving Tips for Small Business Owners

Starting a business is hard, but dealing with it afterward is even harder.

For new businesses or small ones, the toughest part is dealing with taxes!

Yet, with smart planning and trying some tips, businesses can handle taxes better.

In this comprehensive blog, we will explore expert-backed tax-saving tips for small business owners in Australia.

Pre-Paying Your Way to Savings

• Future-Proof Expenses:

Skip the yearly scramble and pre-pay some expenses like rent, insurance, and professional subscriptions before the 30th of June.

You can deduct up to 12 months’ worth of future expenses this year, giving your tax bill an excellent trim.

• Instant Asset Write-Off:

Feeling fancy for some new equipment? This year, you can write off the entire cost of any business asset, new or used, up to $150,000!

Cash Flow Control is the Key

• Invoice Timing Twists:

Think strategically about invoicing. If cash flow allows, hold off on sending those final invoices until the new financial year, giving your tax bill a breather.

• Super Boost:

Top up your super contributions! Remember, you can claim up to $25,000 in deductible super contributions each year. Think of it as a double win – saving taxes and securing your future.

• Debt Review:

Review your debtors’ list and write off any unrecoverable debts. These get removed from your income in the year you write them off, regardless of when you sent the invoice.

Smart Structures for Savvy Savings

• Structure Evaluation:

Take a second look at your business structure and personal assets.

Are you using the right type of company?

Owning investments in the most tax-efficient way?

Sometimes, a small tweak can give big savings. Remember, companies have a capped tax rate of 27.5%, which can be a game-changer if your investments touch on the big bucks.

• Trust Resolutions:

Got a discretionary trust?

Before June 30th, the trustees need to document how they’ll distribute the trust income to beneficiaries.

Skipping this step can lead to major tax headaches – don’t let that happen!

Investing for Tax Benefits

• Early Stage Investment:

Invest in Early Stage Investment Companies (ESICs) and score a generous 20% tax offset on the amount you invest!

Bonus: ESIC investments are free from capital gains tax for 10 years.

• Venture Capital Partnerships:

You may join forces with other investors in an early-stage venture Capital Limited Partnership and snag a 10% tax offset on your investments.

Partnering up can double the tax-saving fun!

Negative Gearing

• Turn Your Property into a Tax Magnet:

If you’re renting out a property and the income doesn’t cover the expenses, you can claim a tax deduction for the difference.

Just remember, this strategy only works if the property’s value is increasing.

Taking Care of Yourself and Your Business

• Income Protection Peace of Mind:

Investing in income protection is smart in two ways. It gives your family financial security if something happens to you, and you can claim it as a tax deduction. Win-win!

• Depreciation Deep Dive:

Review your depreciation schedule and write off any outdated equipment completely.

• Income Delay Magic:

If you can swing it without hurting your cash flow, consider postponing some income until after June 30th.

This can lower your tax bill for the current year. Remember, this only works if you’re registered for GST on a cash basis.

• Stock-take Savvy:

Time to assess your inventory! Write off any damaged or obsolete stock and take a complete stock-take.

Remember, you can value your stock at the lower of its cost or its net realisable value.

Tax Rebates

• Claim Every Rebate You Can:

From medical expenses to spouse super contributions and educational rebates, there’s a whole buffet of tax rebates out there.

Make sure you’re claiming them all! Don’t let free money go to waste.

• Logbook:

Updating your vehicle log books regularly means you’re claiming the most accurate amounts for your car expenses.

Don’t underestimate the power of good record-keeping!

• Watch-list Warning:

Every year, the ATO reveals what they’re focusing on during tax time.

Home office expenses, car costs, and education expenses are popular targets, so be extra careful and ensure you’re claiming them accurately.

• Record-Keeping:

The better your records, the more deductions you can claim and the less you’ll pay.

Think receipts, invoices, and bank statements – keep them safe and sound!

Good records also come in handy if the ATO has questions.

• Exit Strategy Planning:

Thinking about selling your business? Start planning your exit strategy now!

Properly structuring your sale can save you hundreds of thousands in capital gains tax when the time comes.

Don’t leave this essential step to the last minute.

Conclusion

The last tip but not the least, is consulting with a reputable and reliable Tax Accountant in Australia. They can help in short-term focusing by minimising your tax bill, while long-term looks at optimising your business structure and investments for maximum tax efficiency over the years.

If you are looking for a reliable Tax Accounting Firm in Melbourne for your small business, you can consult Tax Purpose. Their expert tax accountants will handle your taxation matters and offer you taxation-related advice through which you can maximise your business potential.