For small business owners, the tax season is the stressful time of the year. The end of every financial quarter indicates a hefty tax bill and more stress. However, if you are a little careful, the tax bill can be reduced greatly. Here are some tips to minimize the small business tax return, which you can start to follow prior to the end of the fiscal year.
Does your business come under the “small business” entity?
From the ATO, the small businesses can get concession and to avail that, and you must first know if you are qualified for that. The organization must have an aggregated turnover of at least less than $10 million. Also, the business should be operating for the entire year or at least a part of the financial year.
Claiming asset depreciation
If you have an annual turnover below $10 million, you can qualify to claim an instant asset write-off. The value should be worth below $20000, which means you can invest in an asset of the same value up to the 20th of June. After that, you can claim back the full value of the tax, and in doing so, the taxable value gets reduced to the asset’s cost. Look for the best tax agent near me, giving a list of professionals you can approach to get help.
Reduction in the tax rates for a small business entity
Businesses with a turnover of $50 million have a company tax rate of 27.5%. It is only if at least 80% assessable income of the company is passive income. It includes rent, dividends, net capital gains, and royalties. If you are using the Trust structure, you have to remember that you have to allocate profits to the Bucket Company. After that, you have to cap tax for the financial year at 27.5%. Also, you must check that the company must qualify in the section of the base rate entity and must qualify for a 27.5% tax rate.
Maintaining a business vehicle logbook.
For the vehicle which you have used for at least 12 weeks in a year, you must maintain a logbook for that. It allows in claiming back vehicle expenses at the time of tax. You will find that legitimate businesses use a vehicle logbook that contains all invoices and receipts regarding the expenses of the vehicle. It can include vehicle costs, maintenance, etc., which can be further used to reduce the costs.
Maximizing deductible super contributions
For every individual, the concessional superannuation is up to $25000, and if you cross this limit, you have to pay a tax. If you want to count the contribution cap towards the employee, it needs to be received by the 30th of June. You must ensure that the “employer super guarantee contributions” have also been included in the caps. If it exceeds the limits, the excess will be in the assessable income, taxed at a marginal rate. It can also include the excessive “concessional contributions charge”.
Bring expenses forward and defer income.
The tax bill can be cut down by deferring the taxable income to the coming financial year. Suppose, if you delay invoicing till the 1st of July, the amount is not counted towards taxable income for the past financial year. It is another way the tax amount can be reduced. The tax agents are more knowledgeable in this regard, and they can assist you with things.
Writing off bad debts.
A tax deduction can be claimed on bad debts if you have proof that claims the debt has been written off by the 30th of June. However, it should be shown in the income previously, and the decision needs to be in writing. So, it will be available as a piece of evidence and eliminating confusion in the end.
Paying superannuation of employees
For claiming a tax deduction for the present financial year, you must ensure that superannuation payments are cleared using super funds. It needs to be done using the “Small Business Superannuation Clearing House (SBSCH)” on or before the 30th of June. It is always recommended to avoid last-minute superannuation payments as delaying can lead to receiving the amount after year-end. By chance, if you have to make last-minute payments and want to include them as deductions for the present year, you can ask the small business tax return professionals. They can assist you in this before the payments are made.
Preparing a property depreciation report
Do you own a rental property? If so, you must make arrangements for a property depreciation report. It lets you claim the extra amount of depreciation. You can also get the building write-off deductions if there is any on the rental property.
Claiming a tax offset for small businesses
Are you operating as a sole trader? In this instance, you are eligible for a small business tax offset on the tax return. It reduces the tax amount by $1000 a year. After you lodge the tax return, the ATO will look after every receipt and everything and calculate the offset depending on the information offered by you.
Small business concessions
In small business concession, taxpayers are eligible to make prepayments for up to a year on rent, loan interests, subscriptions, etc., before the 30th of June. After that, you can get a full tax deduction for the present financial year.
Reporting job keeper payments
The job keeper program came into existence in helping eligible employers subsidize staff wages. It was done after the global pandemic encountered by the whole world. When including the incentive, you have to include them in the tax report as counted under the tax. Also, you must remember that the accounting method affects the job seeker payment. That’s why it must be included on the tax return.
In the end
The tax return is a complicated process, and every business owner may not be aware of all facts completely. Thus, you can approach the top tax agents near you who have information about tax payments.
