FAILURE TO PLAN IMPACTS BUSINESS BENEFITS AT TAX TIME

• 29 per cent of SMEs are yet to start preparing for the end of the financial year.
• 30 per cent of SMEs missed opportunities to reduce tax liabilities last financial year.
• Of the 84 per cent of SMEs who use an accountant or bookkeeper, 41 per cent have not yet had a discussion about tax time preparations. 

With the end of the financial year just around the corner, almost one third (29 per cent) of Australian small and medium enterprises (SMEs) have not yet commenced their tax time preparations, according to research released by the Commonwealth Bank.

The research also revealed 30 per cent of SMEs did not maximise the opportunity to reduce their tax liability last financial year. The most common reasons for not maximising reductions were not planning for the end of the financial year early enough (40 per cent) and not keeping track of all tax minimisation strategies available (36 per cent).

The survey found SMEs refer to a range of external resources to help them prepare for the end of the financial year, with the majority of businesses using an accountant (79 per cent), a bookkeeper (22 per cent) or the ATO website (19 per cent). Interestingly, of those businesses that use an accountant or bookkeeper, 41 per cent have not yet had discussions with them regarding tax time preparations.

Adam Bennett, Executive General Manager Local Business Banking, Commonwealth Bank, said while the lead up to the end of June is often a busy time for businesses, setting aside time to speak with an expert and review business financials before the end of the financial year can put you in good stead for tax time.

“With the end of the financial year fast approaching, we encourage businesses to act now to take advantage of the tax strategies available to them.

“Some businesses are spending more than 40 hours preparing for tax time, so we understand this can put undue pressure on internal resources. By taking a number of simple steps and speaking with a professional adviser early, businesses can ensure they are using this time effectively and can potentially improve their financial position for the year ahead,” said Mr Bennett.

The research also found there is a general level of awareness amongst SMEs regarding most tax minimisation strategies, however, there appears to be a disconnect between awareness and those businesses that plan to use these strategies. For example, 78 per cent of businesses are aware they can write-off or write-down obsolete plant and equipment, however, only 53 per cent of SMEs plan to use this strategy.

“It’s encouraging to see many businesses are aware of the available tax strategies, however, when compared with usage levels there appears to be a noticeable gap. While not all tax strategies are suitable for every business, it’s important for SMEs to understand which strategies apply and starting discussions with an accountant or bookkeeper is a good first step,” said Mr Bennett.

Tax tips for small businesses*

• Review your capital expenditure and make upfront purchases for fixed assets to lower your assessable income before June 30.
• Consider a stock-take as the value of your trading stock on-hand at the end of the year may affect your assessable income.
• Write off your bad debts before June 30 to claim the deduction.
• Claim deductions for staff salaries and wages paid before June 30.
• Purchase necessary office equipment before June 30 to claim the deduction and possible tax concessions for depreciating assets.
• Make your superannuation contributions to a complying superannuation fund before June 30 to claim the deduction this financial year.
• Claim immediate deductions for interest prepayments as long as the service period  is not more than 12 months.
• Claim capital gains tax (CGT) concessions if you have disposed of, or plan to dispose of, an active asset in this financial year.
• Consider cash flow benefits that may be available where you account for goods and services tax (GST) on a cash basis.
• Adjust your PAYG instalments by notifying the ATO if you expect higher or lower profit this financial year.

* Outlined above are a range of tax concessions that are available to businesses at the end of the financial year. Once you’ve established which suit your business, make sure you consult your accountant and check your specific eligibility.

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