Once May and June roll around, it’s time to take some last-minute steps to reduce your tax bill for 2021/2022.
Over the next couple of weeks, there are some steps to take and things to keep in mind if you want to be well organised:
- Pay people up front
Take care of supplier invoices as soon as you can. If you pay all possible bills before the end of the financial year, your overall taxable income will decrease. Even prepaying invoices that are due in July or August can help reduce your taxable income.
If your business happens to have a surplus of cash, see if you can prepay things like rent or put in a larger order with your supplier. This will get the money out of your account so it can’t be taxed for this financial year.
- Defer income
In the meantime, if it’s possible to hold any income until the next financial year, do so. Hold onto invoices until after 30 June and put off receiving any investment or capital gains income. Whatever you can do to reduce your taxable income will reduce your possible tax bill.
- Chase down bad debts
Bad debts are seen by the ATO as money lost. Chase down any outstanding debts owed to you and take action if they are well overdue. List every bad debt you have written off in a management document to record the amount owed and the timing. Keep the records in your accounting system so you can receive a deduction.
Be aware, however, that bad debts don’t make your business look so great if you’re preparing to sell. Where possible, get payment upfront from your clients so you can avoid the issue of unpaid accounts.
- Get your records in order
Your tax accountant will be able to produce a healthy and speedy tax return if you have all your paperwork in order. When they have clearly written and collated records, it is far easier for your accountant to process your return. It also means that possible deductions are less likely to be missed.
It’s ideal if you use cloud-based financial management software and process all payments through a couple of business accountants that are connected to your software. This gives you instant access to records.
- Pay for small things like repairs, maintenance, new office supplies
Repairs, maintenance, office supplies and other small expenses are all claimable in your tax return. Now is the time to organise and pay for these minor expenses so they stay within the current financial year. You can talk to your accountant or check which deductions apply at the ATO website.
- Check you have paid yourself super
It is easy to focus on employees’ superannuation and forget that you need to put some super aside for yourself.
Ideally, you will be paying yourself superannuation on a regular basis. If you have sold any business assets in the past financial year, you may be eligible for capital gains tax (CGT) concessions. You can pay the extra from your CGT into the super fund of your choice. Read more about the specific conditions, eligibility and price caps, or talk to your tax accountant to make a plan for contributing to your super.
Super payments are tax deductible so putting money aside for yourself is a good way to save.
- Review obsolete stock
Obsolete stock is likely to be tax-deductible. A stocktake of old inventory can earn you a decent return. Double-check the details with the ATO, catalogue all your obsolete stock before 30 June, and claim it with your return.
- Organise your deductions
If you are a small business, most asset purchases of less than $150,000 are immediately deductible. This includes new and second-hand items. Make sure you identify any purchases throughout the past financial year and establish whether they might present a possible deduction.
- Speak to your tax accountant
Once you have your basic records in order, reach out to a Brisbane tax accountant who understands the more complex requirements of your tax return and can help you minimise the amount you owe to the ATO.
Looking for the best Brisbane tax accountant? Contact us today.