Most small business owners don’t plan their tax.
Tax planning must be done before the June 30th Deadline if you want to reduce tax bills. Setting down in your mind to have your tax meeting well after June 30thfor the year just gone is too late for anything to be done. The dye has been cast.
How does it work?
If you meet with your accountant after June 30th, your accountant can only claim what you are entitled to, based on your actions prior to June 30th.
However, with a bit of careful planning with your accountant before the end of June, you can not only reduce your tax but also make more informed decisions in the best interest of your business. You need to take into account the direction you want your business to go in, cash-flow requirements. You don’t want to be spending money for things you don’t need.
How can a good accountant help you to minimize your tax bill?
- Deferring of income
- Splitting of income to take advantage of lower tax rates and tax offsets
- Bringing forward expenses to the current tax year
- Securing Superannuation deductions
- Taking advantage of the Tax Incentives for Small Business
- Writing off bad debts
- Selling off obsolete stock or equipment
- Prepayment of expenses
These are just a few of the strategies that your Account may present to you at your tax planning meeting.
Tax planning for everyone
- Salary sacrificing into super may reduce your overall tax liability, but be sure not to go over your contribution limits. You need to speak to your employer to see if they provide any salary packaging options and then speak to us to see if it can benefit you.
- If you contribute super for your non-working spouse you may be entitled to a tax rebate.
- Claim for net medical expenses over $2,162 for singles below $88K who are qualified.
- Bringing forward personal expenses, such as paying for your income protection insurance annually in June
- Re-paying interest on investment loans may significantly reduce your income for the current tax year and in turn reduce your tax payable.
Tax planning for investors
- Ensure that you are claiming the maximum depreciation allowances for your property. Considering the virtue of hiring a quantity surveyor to deliver a report to you of the depreciation that you can claim often produces excellent tax deductions. For example, depreciation on your building is 2.5% per year. If the value of your building is $200,000 that is a tax deduction of $5,000.
- Carry out repairs to your investment property before the end of financial year and claim the deduction in this year’s tax return.
- If you have received a capital gain from your investments, a review of your investment portfolio could help you to determine whether there is a poorly performing investment that no longer suits your circumstances and which should be sold. The capital loss can offset the capital gain you made and help you save tax, while also freeing up money for more suitable investment opportunities.
- Borrowing to invest can be incorporated into your overall financial planning and would be directed towards significant tax savings.
- A lump sum or regular debt recycling strategy may be a worthwhile long term strategy to reduce your taxable income and build wealth.
- There are a number of investments which are tax advantaged in themselves. Choosing these investments as part of your overall planning can produce excellent results.
Other Tax Planning Essentials:
- Ensure you maintain appropriate receipts and documentation of all of your claims. In most cases if you can’t provide proof then you shouldn’t be claiming the deduction unless you want to attract tax penalties.
- If you exceed certain income limits you may have to pay the Medicare levy surcharge. Having appropriate private health insurance will ensure you avoid the surcharge and receive the rebate.
The first 10 callers up to the 16th June will secure a place in our tax planning interview series before they close for the year.