The end of the financial year is approaching, so you could start making sure you have everything you need to manage your tax.
Below are some ideas you should discuss with your accountant or tax adviser or research further.
“Small Business Entities” for tax purposes are generally businesses with an aggregated turnover of less than $10m.
1. Tax deductions
If you are a “small business entity”, incurring some expenses prior to 30 June may increase the amount of your allowable deductions for this financial year (but may reduce what you are entitled to claim next year). Some things you should consider are:
Review your assets
“Small Business Entities” are entitled to immediately write off the acquisition of new depreciating assets that cost less than $20,000 and are used or installed ready for use prior to 30 June 2018. Eligible assets may include a new business vehicle, machine or equipment.
The Government has announced (in the 2018-2019 Budget) that it intends to extend this rule to 30 June 2019. At the time of writing, the extension was not yet law.
Assets that cost more than $20,000 may be “pooled” and claimed at 15% in the first year and 30% in subsequent years. When the balance of the “pool” is less than $20,000 the balance can be claimed as a deduction or “written off”.
Further information is available on the ATO website.
Prepay your business costs
Prepaying some expenses prior to 30 June may increase your allowable deductions for this financial year. Expenses that may be eligible are those that relate to a service period of 12 months or less. Some costs you can consider are annual professional subscriptions, insurance policies and utilities. You should be mindful that claiming these expenses this year may reduce the amount you can claim next year.
2. Get your paperwork in order
Good record keeping makes good business sense no matter what time of year. It helps you keep track of how your business is going, makes it easier to comply with tax record keeping requirements, and enables you to source documents if you need to apply for finance.
Some examples of records you need to keep are:
- Receipts for sales and purchases
- Documents about goods and services tax (GST)
- Records related to tax returns, activity statements and employee superannuation guarantee contributions
3. Write off bad debts
You may be entitled to a deduction if you are no longer able to recover amounts your customers owe you. For this reason, you may want to review your receivables prior to 30 June and determine which accounts you have previously included in your assessable (or tax) income that have now gone “bad”. The rules for claiming a deduction for a bad debt are complicated and you should consult with your tax adviser to ensure that you satisfy all the necessary criteria before determining that a debt is bad.
4. Pay your employees’ super the right way
Make sure your employees’ super contributions are in order. You need to pay your employees’ super on time and in a way that is SuperStream compliant. You may also want to consider paying the Superannuation Guarantee amount on wages earned to the employees superannuation fund in late June rather than waiting until July as the super contributions are only deductible when they are paid.
5. Don’t miss tax deadlines
It can be easy to miss the due dates for lodging your tax return, pay as you go (PAYG) and business activity statements (BAS). Marking these dates in your calendar can save you stress around tax time. There may also be penalties if you lodge after the due date.
For the most up-to-date taxation information, you can find more information on the ATO website or speak to an accountant or tax adviser.