How to pay less tax this year
Well that got your attention, didn't it!
It's June, the last month of the year you can implement tax planning strategies to influence your tax bill for the 2019-2020 financial year. Say what!?
Tax planning is a lot about being strategic about when you pay for business expenses, or when you recognise income. Let's be clear though, if you are paying tax it means you are making money, and that is a good thing.
A common mistake that small business owners make is spending big purely to save on tax. Ultimately for every dollar spent, business owners will receive a 27.5c tax saving. You don't need an accounting degree to know that that is a silly investment decision. Keep this in mind when reading these tax tips, and focus spending strategically on necessary expenses or those that will help you achieve your business goals.
"Don't spend a dollar to save 30 (27.5) cents."
In the current economic climate, businesses need to hold on to their cash whereever possible. So, let's get smart about your bill to the ATO this financial year.
Here are my top 4 tax planning tips for small business:
Delay - Review your invoicing for the current tax year and where your cash flow permits, delay invoicing until July 2020 to reduce your taxable income in 2019-2020.
Prepay - Prepay some of your expenses in this financial year for next year. This could be things like your accounting fees, rent, advertising, insurance, and subscriptions. You can deduct up to 12 months of next year's expenses from your income in your 2019-2020 income tax return.
Review Accounts Receivable - times are tough right now. If you have invoices outstanding and you don't expect that you will ever receive payment, write the debt off as a bad debt in your accounting software prior to 30 June 2020 so that you aren't paying tax on money that you are likley never to receive.
Take advantage of the $150,000 instant asset write off - This allows you to claim a tax deduction for business assets you purchase, both new and used prior to 30 June 2020. As it currently stands, this amount reduces to $1,000 from 1 July 2020, so if there is a business asset you have been thinking about aquiring or upgrading, now is the time to do it.
As always, it is best to speak with your accountant about how the above strategies apply to your business.
If you have questions or would like to get in touch, you can contact us at firstname.lastname@example.org.