“ Of course, I am minimising my tax. Anybody in this country who does not minimise his tax wants his head read. I can tell you as a government that you are not spending it so well that we should be donating extra. “ – Kerry Packer
If you agree with K.P. here are some simple strategies you can use to minimise your small business tax.
If possible, defer issuing further invoices and receiving cash/debtor payments until after 30 June 2020. This strategy pushes tax payable to future years.
DEFER INVESTMENT INCOME & CAPITAL GAINS
If possible, arrange for the receipt of Investment Income (e.g. interest on Term Deposits) and the Contract Date for the sale of Capital Gains assets, to occur AFTER 30 June 2020.
The Contract Date is generally the key date for working out when a sale occurred, not the Settlement Date!
BRING FORWARD EXPENSES
Purchase consumable items BEFORE 30 June 2020. These include marketing materials, consumables, stationery, printing, office and computer supplies. Spend the money now and get the deduction this year.
INSTANT DEDUCTION FOR ASSETS PURCHASES
The recent Federal Government COVID-19 assistance packages has expanded deductions for asset purchases, plus new accelerated depreciation laws.
If your business has a turnover under $500 million, business assets purchased up to the amount of $150,000 (exc. GST) will be immediately deductible.
You should buy these assets and use them or have them ready for use before 30 June 2020. Talk to us today about your options!
PAY EMPLOYEE SUPERANNUATION NOW
To claim a tax deduction in the 2020 financial year, you need to ensure that your employee superannuation payments are received by the super fund or the Small Business Superannuation Clearing House (SBSCH) by 30 June 2020.
You should avoid making last minute superannuation payments as processing delays may cause them to be received after year-end. If for any reasons you end up having to make last minute payments and you would like to claim them as deductions for the current year, contact us immediately and before you make any payments for possible resolutions
TOOLS OF TRADE / FBT EXEMPT ITEMS
The purchase of Tools of Trade and other FBT exempt items for business owners and employees can be an effective way to buy equipment with a tax benefit.
Items that can be packaged include handheld/portable tools of trade, computer software, notebook computers, personal electronic organisers, digital cameras, briefcases, protective clothing, and mobile phones.
If structured correctly, the employer will be entitled to a tax deduction for the reimbursement payment to the employee (for the equipment cost), claim any GST input credit, and the employee’s salary package will only be reduced by the GST-exclusive cost of the items purchased.
You should buy these items before 30 June 2020.
REPAIRS & MAINTENANCE
Make payments for repairs and maintenance (business, rental property, employment) BEFORE 30 June 2020
MOTOR VEHICLE LOG BOOK
Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2020. You should make a record of your odometer reading as at 30 June 2020 and keep all receipts/invoices for motor vehicle expenses.
An alternative (with no log book needed) is to simply claim up to 5,000 business kilometres (based on a reasonable estimate) using the cents per km method
DEDUCTIONS FOR PREPAYMENTS
“Small Business Concession” taxpayers can make prepayments (up to 12 months) on expenses (e.g. loan interest, rent, subscriptions) BEFORE 30 June 2020 and obtain a full tax deduction in the 2020 financial year.
If applicable, you need to prepare a detailed Stock Take listing as at 30 June 2020. Review your listing and write-off any obsolete or worthless stock items.
Talk to us about your different options for valuing Stock, and how they affect your tax payable.
WRITE-OFF BAD DEBTS
Review your Trade Debtors listing and write-off all bad debts BEFORE 30 June 2020. Prepare a management meeting document listing each bad debt, as evidence that these amounts were written off prior to year-end and enter these into your accounting system before 30 June 2020.
INVESTMENT PROPERTY DEPRECIATION
If you own a rental property and haven’t already done so, arrange for the preparation of a Property Depreciation Report to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property.
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this information, you should assess your own circumstances or seek advice from your financial adviser and seek tax advice from your accountants at Beck Partners – Chartered Accountants. Information is current at the date of issue and may change.
Talk to us TODAY for assistance to reduce your tax!