As a small business owner, you’d probably agree tax time is one of your least favourite times of the year. It doesn’t have to be this way. Getting the essential tasks done before handing things over to your tax advisor can lower stress and hassle, making tax time not as bad as you imagined.
Read on to find out how you can make tax time relatively pain-free for your small business.
If you (or your bookkeeper) have been diligently logging your small business expenses and income in a profit and loss statement throughout the financial year, that’s great. If you haven’t, now is the time to go through your receipts and make sure expenses, income, and receivables and payables have all been logged.
If you hold inventory as a retailer or wholesaler, you might need to conduct a stocktake to update your records. Tax time is also a good time for reviewing your list of debtors and creditors, and for updating your asset purchase and improvement records. Other records to complete include payroll and PAYG withholding, fringe benefits tax, and GST records, so you can report accurately to the ATO on these.
Deductions and concessions
Familiarise yourself with deductions, concessions, offsets, and rebates you can claim. Have you tracked your travel expenses, motor vehicle expenses, and salary and super? Do you hold a log book for your motor vehicle usage? Repairs and maintenance costs could also be claimable. Ensure your records are complete before preparing your tax return, so you can minimise your tax bill.
Easy-to-forget deductions include:
- Bad debts – Take the opportunity to do a bad debts review. If you identify any unrecoverable debts on your books, you can claim tax on those amounts. However, make sure you’ve made a genuine attempt to collect the debt before you include it on your tax return.
- Fixed assets register – Check your fixed asset register for any items you’ve discarded. If there’s anything you haven’t claimed depreciation for, include this in your tax return.
- Immediate asset write-off –You may be able to write off the full amount for any asset costing less than $20,000.
Deductions and concessions can change from year to year, so if you’re having trouble identifying what you can claim, work with your tax advisor. If you’re planning to make a big purchase for your small business, your tax advisor can give you advice on whether to do it now or after the financial year is over.
Look towards the next financial year
Part of your tax preparation for this financial year should include looking to the next year. Incurring expenses in the current year can save you money right away. For example, you could decide to repair equipment now to help minimise your tax bill for the current year. It’s also a good time to formalise employee bonuses so you can claim for them straight away.
If tax changes are on the horizon, check how they’ll impact your small business. Review whether you can change your strategy to minimise your tax bill. Talk to your tax advisor for advice if you have any doubts about bringing expenses forward or how changing tax laws will impact your business.
Adjust your financial strategy
Review your accounts for the past year and consider whether your targets were met. This is a great exercise for identifying areas where you can improve in the next financial year. Devise a cash flow forecast, adjust your business budget, and review major items like your marketing plan.
After establishing a new financial strategy, you can consider things like your business structure. For example, switching to another type of structure could allow you to optimise tax for the next financial year.
Work with your tax advisor
Imagine the feeling of relief as you sign off your paperwork to your tax advisor. Working with a trusted tax agent gives you peace of mind. An experienced tax agent ensures you take advantage of all allowable deductions. You’ll also be confident you’re complying with tax laws and avoiding costly penalties or delays. Make time to consult your tax and financial advisor not only for tax return preparation but also to discuss possible strategies to boost your business’s finances.
At tax time you should have completed all your bookkeeping records so your tax agent can prepare an accurate, up-to-date return. However, it’s also a great time to check your deductions and review your business strategy for the next year. By working with your tax and financial advisor, you can reduce your tax bill and formulate an effective business strategy for the next financial year.
Pinn Deavin is an integrated financial services organisation helping businesses with all their tax, business and investment advice needs. To find out more about how we can take the stress out of tax time, contact us today for more information.