What is the purpose of tax planning for small business?

A tax planning for a small business helps you to reduce the amount of taxes paid to the Government, and maximize your return. The tax planning will use beneficial tax-law provisions, such as allowable deductions, tax credits, applicable breaks, and will work on reduce your taxable income.

Tax Planning Tips:

• Prepaying some of your 2021-22 expenses (such as your rent, insurance or subscriptions to professional associations) in the 2020-21 financial year. Up to 12 months of the following year’s expenses can be deducted in the current tax year
• Taking advantage of depreciation measures, such as temporary full expensing, which enables you to immediately deduct the business portion of the cost of eligible depreciating assets that are first held and first used or installed ready for use for a taxable purpose between 6 October 2020 and 30 June 2022. Find out more on depreciation https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/?=redirected_depreciation
• Reviewing and postponing some of your invoicing for the current tax year, if appropriate
• Topping up your voluntary superannuation contributions.
• Reviewing your debtors and writing off any unrecoverable debts. Find out more https://www.ato.gov.au/Business/Income-and-deductions-for-business/Deductions/Deductions-for-unrecoverable-income-(bad-debts)/
• Deducting any start-up expenses, if applicable – such as obtaining legal or accounting advice on your business structure, and fees in relation to establishing the structure (eg. ASIC company registration fee).
• Bringing forward any invoicing into the current financial year for scheduled work that will be carried out in the next financial year, if it is appropriate to do so.
• Paying your expenses as they are due, rather than pre-paying them in advance during the current tax year.
• Purchasing any required equipment or business assets in this year. If you decide to purchase business assets, you should base this decision on the needs of your business. For example, you might need to purchase a vehicle for deliveries to help expand your business operations in order to achieve business goals, or because it is in line with your business plan.

Additional tips for small business owners:

• Avoid spending on business assets for the sake of claiming tax deductions. In most cases, you’ll find yourself paying $1 to save 30 cents in tax (based on the most common business tax rate)
• If your business makes a loss, you may be able to claim a deduction for it in a future year, offset it as a current year loss or carry back your tax loss. Find out more https://www.ato.gov.au/Business/Income-and-deductions-for-business/Losses/?=redirected_businesslosses

An effective tax plan should also involve a review of your business structure to ensure you’re achieving the best possible tax outcomes. This should consider factors such as tax efficiency, governance, asset protection, flexibility for change and ease of administration. If you feel your business could be leveraging a more appropriate business structure, we can advise on a restructure that maximizes the benefits available to you.

Contact us to discuss the benefits of tax planning for making a positive difference in your business outcomes. Please call the office on 9306 8888 to book your complimentary initial consult.