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Strategies to Minimise Taxes for Small Businesses

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What small business owner wants to pay more tax than they need to? No one! So, here are tips to ensure you get the most out of your money during tax time.

Utilise the $20,000 immediate tax deduction.

In the budget issued on 12 May 2015, the Federal Government announced that qualified small enterprises can claim an immediate tax write off for assets bought for less than $20,000. This law will replace the $1,000 limit until 30 June 2017.

In order for the deduction to qualify for the 2015 financial year, you have to make sure the assets are set up and operational by 30 June 2015. If you don’t need any assets, or have not got the money to pay for one prior to the end of the year, don’t forget that you can deduct the balance of any small enterprise pool with a deductible amount of less than $20,000 and receive an instant write off.

You have to make sure that your assets are qualifying assets. For example, capital works are not covered by the basic depreciation guidelines and are covered by various rates, which are way below the general pool and immediate deduction rates.

Maximise contributions to your super fund.

Plan for your future – in the form of superannuation. The concession limit beginning 1 July 2014 is $30,000 for all persons. However, the limit is $35,000 if you were 49 years old or older on 30 June 2014. When making the most out of your concessional contributions, take note that your mandatory 9.5% is included in the cap and all contributions must be sent to the super fund before 30 June.

Prepayments – a no brainer!

Making prepayments, if you have the available money, is a wise move. Businesses can write off prepayments given in the amount of over $1,000, provided the eligible service is used in under 12 months. Consider making prepayments for part of your rent or interest on loans. You can write off prepayments below $1,000 no matter what the service period is.

Time Capital Gains Tax events appropriately.

Whether you are trading as a single entity or on behalf of a trust, find out if the 50% General Discount is valid for any planned asset sale. This means that it is a prerequisite for you to hold the asset for no less than 12 months. As a result, you have to study the timing of the sale.

Furthermore, you may also have the right to claim more concessions and discounts for your small business, including Rollover Relief or Active Asset. If you’re thinking of selling an asset, it is recommended that you meet with a tax specialist to advise you on the possible outcomes of transactions and the allowances that you are entitled to.

Consider writing off bad debts that you will never collect.

It is advised that accruals basis taxpayers with bad debts consider writing off those debts prior to 30 June to make sure they can claim tax deductions for the present year. If your GST payments are made on an accruals basis, any changes made to bad debts will probably cause a refund of the GST that has already been paid on a past BAS. When you write off bad debts, comply with the guidelines to make sure that it is really a bad debt and the required measures have been taken to get payment for it.

Ensure outdated stocks are written off.

Always perform an inventory of your stocks prior to the conclusion of the financial year. Make sure you write off obsolete stocks that you have identified. Your tax liability will decrease as a result of this.

Change your tax planning for the better by investing in good online accounting software and heeding the advice and recommendations of your accountant or bookkeeper. PJS Accountants can help you organise your tax, accounting and bookkeeping affairs. We work with large companies, SMEs, family businesses and individuals. For enquiries, contact PJS Accountants.