7 tips and 3 tests to help save you tax dollars
By Peter Lowe, JSA Group
It is hard to believe but we are rapidly approaching the end of the financial year. If you haven’t started your end of year planning, including tax planning, get to it. A rushed decision or no action can cost you money! Many people see end of year as a pain but it is a great opportunity to obtain or maintain control of your business finances and the long term health of your business.
Here are seven areas you can look at that may save you thousands of tax dollars. To help you work out if a tip is worth following up and its priority I am also giving you three tests to consider too.
7 tax saving tips
1. Debts and depreciation
Write off bad debts and review your depreciation schedule to scrap obsolete items. Consider selling any loss making investments to offset any capital gains that you have made in the year. Check with your accountant about writing off depreciating assets by small businesses as there are proposed rule changes.
2. Take stock and stocktake
It may be worth biting the bullet and writing off slow-moving stock which is unlikely to sell. A lower closing value of trading stock defers income and therefore tax.
3. Prepay to deduct
Making prepayments on things such as interest, rent, bonuses, materials and supplies or anything you will require for the next tax year can maximise allowable deductions for small businesses.
4. Trust your accountant
If you operate through a trust or have company loans between yourself and your company it is vital to see your accountant before June 30 to ensure correct treatment. Have trustee resolutions to appoint income.
5. Supercharge Super
Make sure staff Superannuation payments are up to date. Paying your superannuation contributions prior to June 30 ensures you receive the benefit of the deduction in the current financial year. If you are a business owner, make sure you contribute to your Super. Salary sacrificed superannuation contributions are a tax-effective way to save for retirement. You can contribute up to $25,000 ($35,000 if you were aged 59 years or more on 1 July 2013).
6. Deductions and grants
Are you are eligible to claim R&D tax concessions or receive an export market development grant? Ensure you have made payments to associated entities to receive the full benefit of your R&D claim.
7. Set the records straight
Have all your paperwork in order and keep your accounting files up to date. With more online accounting solutions you can increase your efficiency in keeping records and dealing with your accountant. One in fifteen small businesses fail because of inaccurate record-keeping necessary for the ATO.
Test 1. The long term test
Are you creating a permanent benefit or simply deferring the tax liability to a later date? It is not a bad thing to simply defer tax but permanent benefits are more valuable.
Test 2. The cashflow implications
It is not all about tax. Don’t let your focus on creating the best tax outcome cause you a short-term cashflow problem.
Test 3. The risky business test
There are always risks with any decision including the seven tips. Not just tax risks but broader funding and business risks. Write down the benefits and risks of any decision to help you to make your assessment.
See an accountant or tax specialist well before June 30. Make the appointment today.
Peter Lowe is a founding Partner and Chartered Accountant at JSA Group Accounting & Tax. Peter has been in public practice for more than 10 years and deals with all facets of business accounting and taxation, specialising in the areas of government/semi-government bodies, charities and not-for-profits, services to mining, engineering, legal, financial and retail businesses.