A Guide To Lowering The Tax Burden Of Your Small Business

The conclusion of each fiscal quarter brings about additional stress and a substantial tax burden for the owners of many small businesses. Your tax cost for your small business can be reduced in a number of ways, many of which are straightforward and within the law, even while you fulfil all of your tax duties. Read tips to help grow your small business.

The following is a list of things that you can start doing right away, as well as things that you can start planning for before the fiscal year comes to a close.

1. Make a claim for asset depreciation

If your total annual turnover is less than $10 million, you may be entitled to claim an immediate asset write-off on any assets with a value up to $20,000, regardless of whether or not they were purchased by your company. 

This indicates that you can make an investment in an asset of up to $20,000 until the 30th of June and then claim the whole amount as a deduction on your tax return. Should you choose to proceed in this manner, the amount that the asset cost will be subtracted from the taxable income that you report.

2. Start making concessional superannuation contributions

Payments to your concessional superannuation fund are subject to taxation at a rate of 15 percent, which is likely to be lower than the rate at which you are taxed on your income. In addition, you are eligible to claim a deduction for your concessional super contributions.

The maximum amount that an individual can contribute to their superannuation through concessions is currently set at $25,000. This restriction applies to people of any age. For this reason, it is a wise decision to make donations that are practical up to that amount by the 30th of June, if you are able to do so.

3. Maintain a logbook for all company vehicles

If you want to be able to correctly claim back car expenditures when it comes tax time, you should make an effort to keep a diary of the usage of your business vehicle for at least 12 weeks throughout the course of the year. If you use a car for legitimate business purposes, the cost of such usage is tax deductible; thus, you should maintain all receipts and invoices pertaining to the expenditures associated with using the vehicle, such as the cost of gas and maintenance. You can hire the best small business tax accountants in Melbourne and Sydney to guide you.

4. Put off taking the money and bring the costs forward

You can reduce the amount of money you owe in taxes by postponing taxable revenue until the next fiscal year. For instance, if you delay issuing invoices until July 1st, the total amount of those invoices will not be included in the calculation of your taxable income for the prior fiscal year.

5. Make sure to claim deductions for any costs that were not paid by the end of the fiscal year

Even if you haven’t yet paid for some expenses by the time the fiscal year comes to a close, you can still submit a claim for a deduction for those costs. The following items are included in these costs:

  • Staff pay and wages: Claim the time duration that staff have worked up to the 30th of June but hasn’t been paid till the new fiscal year begins.
  • Staff bonuses: If you are committed to paying the expenditure, you may be eligible to claim a deduction for employee bonuses and commissions that are owing but unpaid as of the 30th of June.
  • Maintenance and repairs: you can submit a claim for work that was completed and billed by the 30th of June, but the payment won’t be made until the following calendar year.

6. Write off bad debts

You are eligible to claim a deduction for bad debts if you can prove that the obligation was cancelled or forgiven by the end of the tax year (June 30), and if the debt was initially included as income. Make your decision in writing (for example, in the minutes of a meeting), which you may then use as proof to show that the debt was wiped off before the end of the fiscal year.

7. Make a claim for a tax offset applicable to small businesses

If you are self-employed and run your firm as a sole proprietorship, you may be able to lower the amount of income tax you owe by claiming a small business tax offset on your tax return. This offset can reduce the amount of tax you owe by up to one thousand dollars per year. The Australian Taxation Office (ATO) will determine your offset depending on the info you supply when you register your tax return with them.

8. Report payments made to JobKeeper

The JobKeeper programme was made accessible to qualified companies in the year 2020 in order to assist them in providing salary subsidies for their employees during the pandemic. If you took advantage of the incentive, then you are required to list them on your tax return since they are considered taxable income. This requires sole proprietors to report the amounts they receive as income from their firm on their individual tax returns.

Closing Thoughts

You may be able to reduce the amount of money that you owe in taxes by utilising the advice that has been provided above. In spite of this, it is always a wise idea to get the expert counsel of a tax specialist or an accountant to ensure that you are operating in the most tax-efficient manner possible and fulfilling all of your requirements. Also, know how your business structure affects you at tax time.

Check with an expert or visit the website of the Australian Tax Office for further details if you are uncertain as to which of the aforementioned pieces of advice could be applicable to you and the company that you run if you have any doubts about it.

Author Bio:

Hi, I’m Eleena Wills. Being a writer and blogger, I strive to provide informative and valuable articles to people. With quality, constructive, and well-researched articles, one can make informed choices. I cover a wide range of topics, from home improvement to hair styling and automotive. You can also follow me on Facebook, Twitter & Instagram


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