Why is tax planning at the year end important?
Tax planning helps to minimise your business tax liability.
Paying tax is not a bad thing, it means your business is profitable, but paying more than tax than you should is a bad thing!
Most people want their business to be working at its full potential and want to save on tax. Tax planning needs to be completed by 30 June every year, which makes it a great opportunity each year to step back, reflect and plan ahead.
End of year tax planning considerations
Helping our clients each year with the tax planning, we:
- reflect and assess the business performance;
- plan to manage any tax obligations; and
- consider the cashflow impacts of tax payments.
During the process, we will ask questions like:
- Do you have a business plan? How is your business performance compared to the plan?
- If your business is not performing as well as expected, why is this the case?
- At 30 June what does the business tax position look like?
- Can anything be done to legitimately minimise tax prior to 30 June?
- What tax is expected to be payable and when the tax will be due?
- Do you have any technical tax matters that need dealing with before 30 June?
This is a great time to also plan for the coming financial year. We like to consider your business strategic plan, budgets and cash flow requirements.
Saving tax – what you need to know
What are some key areas to consider for tax planning?
If you own a business, make sure you maximise contributions to your own superannuation each year (for both you and your souse). This is the best tax planning available. You are literally getting a tax deduction for investing in your own future.
For employers, superannuation is deductible for the year that the contributions are received by the superannuation fund. If it is possible, pay your employee’s superannuation before 30 June to make sure the business can claim the tax deduction this financial year.
Assets – Instant asset write-off
There are a number of thresholds and dates to consider when a business purchases any new assets so to access the instant asset write-off:
- Before 29 Jan 2019 – Value up to $20k and business turnover is less than $10 million
- 29 Jan – 2 Apr 2019 – Value up to $25k and business turnover less than $10 million
- 3 Apr – 1 Jul 2020 – Value up to $30k and business turnover less than $50 million
Remember: a business should only buy assets that it can afford and that will be used. Don’t buy things just to save tax!
Write off bad debts
Every business should review the debtor list before 30 Jun 2019. Any debts that can not be recovered should then be written-off.
Stocktake to calculate stock on hand
Every businesses that has stock should complete a stocktake before 30 Jun. The stock can be valued at market value, cost or replacement value (whichever is lowest). These different values can make quite a significant difference.
Bring forward expenditure
If possible, bring forward expenditure. Dependent on business cashflow, you may bring these costs forward into the current year and this will reduce the tax payable. Expenditure may include equipment repairs, marketing orders, stationery, or any other outlays that are necessary.
As with all planning, it’s best to start early, so all options can be considered and budgeted.
Would you like to find out more about business tax planning and what you should do prior to 30 June?