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3rd May, 2018

Common tax minimisation strategies for small business

It’s tax planning time! If you’re a small business owner you don’t want to have to pay more tax than you have to. The following tips will ensure you get the most bang for your buck come tax time.


1. Take advantage of the $20,000 immediate asset write off


The Federal Government announced in the 2015 budget that all eligible small businesses would be entitled to an immediate deduction for asset purchases costing less than $20,000. This measure replaced the $1,000 threshold which was in existence up to the announcement and will be in existence until 30 June this year (at this stage).

You will need to ensure that the assets are installed and ready for use by 30 June 2018 in order for the deduction to be available for the 2018 financial year.

If you do not require any assets or haven’t got the cash flow to afford them before year end, it’s really important to remember that you’re able to write off the balance of any small business pool with a written down value of less than $20,000 and get an immediate deduction!

You will need to ensure that your assets are eligible assets as, for example, capital works are not subject to the simplified depreciation rules and are subject to different rates, which are much less than the general pool and immediate write off.


2. Maximise superannuation contributions


As a small business owner, you should be planning for your future, and that means superannuation.

The concessional cap this financial year is $25,000 for everybody.

When maximising the concessional contributions you need to remember that the limit includes your compulsory 9.5 percent, and that all payments must be received by the super fund prior to 30 June.


3. Make prepayments


If you have the available cash, making prepayments for expenses is a no-brainer.

Businesses are entitled to a deduction for prepayments made for greater than $1,000 as long as the eligible service period is less than 12 months.

You may consider prepaying a portion of rent or interest on borrowings. Prepayments under $1,000 are deductible regardless of the service period.

You can find more information on pre-paying expenses here


4. Consider the timing of Capital Gains Tax events


If you’re trading as an individual or through a trust you should check whether the 50 percent General Discount is applicable for any proposed asset disposal.

This requires that you have held the asset for at least twelve months. This means that you need to consider the timing of the disposal.

In addition you may be entitled to further small business concessions and discounts, such as Active Asset or Rollover relief.

If you’re considering the disposal of an asset, you would be wise to contact your tax adviser so that they can help you to understand the consequences of the transactions and the concessions that may be available.


5. Write off those bad debts that will never be collected


If you are an accruals basis taxpayer and have bad debts, you should consider writing them off before 30 June to ensure a tax deduction is claimed in the current year.

If you pay your GST on an accruals basis, any bad debt adjustment is likely to result in a refund of GST that has already been paid on a previous BAS.

When writing off bad debts, make sure you follow the rules to ensure that the debt is bad and that the necessary steps have been followed to collect the debt.


6. Write off obsolete stock


Make sure you conduct a stock take before the end of the financial year.

Any obsolete stock that is identified should be written off.

This will reduce your tax liability.

Improve your tax planning this end of financial year with MYOB online accounting software, it’s the power to manage business, your way. For further information or assistance with setting up or upgrading please contact Keeping Company.

The information provided here is of a general nature for Australia and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’s circumstance will vary for end of financial year.