The best way to save tax in business is to consider and apply strategies prior to 30 June each year. After year end, the options available to improve your tax position are severely restricted. Activ8 are business tax specialists. In this article we share some of our best tax tips.
Tip 1. Maximise Your Super Contributions
Superannuation is a fantastic vehicle for tax effective investments. We recommend that every year you maximise the amounts you put into super. The maximum you can claim each year changes and you need to take into account contributions made by your employer, including your own business, and personal contributions. Remember to speak to your financial planner about how super fits into your personal financial plan. Our advice is purely focused on the tax benefits alone.
Tip 2. Take Advantage of the Instant Asset Write Off
The temporary full expensing of assets purchased for business use has been extended to 30 June 2023. This means that businesses can get an immediate tax deduction for the full amount of the asset’s cost in the year it is purchased.
Therefore if you are planning some equipment purchases, get them completed before 30 June to maximise the deduction in this financial year.
Note – cars are capped to a maximum claim of $60,733 for the 2022 year.
Tip 3. Do a Stocktake at 30 June
Does your business have trading stock? Do a stocktake at 30 June. This not only helps to get accurate profit figures, but you are eligible for a tax deduction for obsolete or worthless items still on the shelf.
Tip 4. Write Off Your Bad Debts
Subject to how you report income on your BAS, you have likely paid tax and GST on income you have invoiced but not yet collected. If you have deemed the debt to be uncollectible, you are entitled to a tax deduction as well as recouping the GST paid to the ATO.
Tip 5. Pay Your Employees’ Super on Time
If you pay super late, you will miss out on the tax deduction. In addition the ATO will impose interest and penalties for late super. We recommend that super is paid each pay cycle so you’ll never be late and you don’t get a big lump sum at the end of the quarter.
Another tip for super at year-end is to pay any June quarter before 30 June to get the tax deduction in the current year. Note – allow 7-10 days processing time to ensure the superfund processes the payment before 30 June.
Tip 6. Keep a Log Book For Your Business Cars
A compliant log book is essential to maximise your motor vehicle claim. Whilst they can be cumbersome to keep a log book, they are only required for 12 weeks and it remains valid for 5 years.
Tip 7. Defer Income to Next Year
If it makes sense to do so, deferring income until after 30 June means you pay tax on it next year, not this year. You can do this by holding off invoicing until 1 July, where appropriate.
Tip 8. Prepay Expenses
Cashflow permitting, you can prepay expenses like interest and rent up to 12 months in advance to boost the tax benefit in this financial year. This does not apply to stock purchases, but basically any other business expense can be paid before 30 June to allow the tax deduction in this year. This is particularly good where you have had a good year and have a bigger than usual impending tax bill.
We hope you find these tips insightful. There are plenty of other tax strategies you can put in place to minimise the tax you pay. It’s never too late to start taking advantage of tax benefits.
If you need any guidance or advice in relation to these tips, contact Activ8 Accountants & Advisors and we can guide you through them. Call us on 07 3367 3366.