Tax is an ongoing headache for small business owners. If it's not managing your cashflow to meet tax payments, it's the red tape involved in doing all the paperwork. However, businesses that do manage to plan their end-of-tax-year strategies now may be eligible to receive additional benefits.
Bring forward deductions
If there's a chance you'll be paying less tax next year, why not maximise your deductions now? Any tax-deductible expenses incurred before June 30 will attract a deduction at the current company tax rate of 30 per cent. If you don't run your business through a company, you won't get the tax cut, experts say it could still be worth using those deductions to save tax now. Eligible small businesses can claim an immediate deduction on expenses prepaid for the next 12 months.
Contribute to super
Experts agree that one of the best ways to generate an immediate tax deduction is to make a concessional contribution to super. This year, the limit on these contributions is $30,000 if you were under 49 on June 30, 2014 and $35,000 if you were older. If you are self-employed you should be eligible to make personal deductible contributions. If you are employed through a family company, it can make the contributions for you and claim the deduction.
Write off bad debts
Every business has them, so turn them to your advantage as June 30 approaches. If a debt hasn't been paid for 12 months and you have made reasonable efforts to recover the money, you may be able to claim a tax deduction by writing it off. The debt must have been recorded as income in a previous tax year and there is no chance of it being repaid.
Deduct losses on trading stock
Do a stocktake before June 30 to see whether any of your trading stock – items you produce, manufacture, purchase for manufacture or sell for your business – has been lost, damaged or become obsolete. If so, you are entitled to a deduction. Tax experts suggest you can choose between three methods of valuing stock – the price you paid for it, its current selling value or its replacement value.
If you use the cash accounting method, your earnings aren't taxable until you receive them. So you may be able to defer tax by opting to receive income after June 30 rather than before. If you're selling an asset that may be subject to capital gains tax, it might be worth putting off the sale until July to defer and potentially reduce your tax bill. Note that the sale date for tax purposes is the contract date, not when you receive the proceeds. There are also capital gains tax concessions for small business of which you may be able to take advantage.
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This is not financial or professional advice. We recommend you obtain independent advice before making any financial decisions.