8 Strategies for Minimising Small Business Tax
Small businesses form a valuable part of the Australian economy and the Australian government provides a range of tax incentives and exemptions to encourage small business owners. When tax time comes, great records, knowing about your allowable deductions, and obtaining professional advice can all help to significantly reduce your small business tax liability. These are eight easy strategies to consider.
1. Review Your Business Structure
Your business structure can significantly boost your ability to legally reduce your tax liability, whether it’s a sole trader, unit trust, company, partnership, or any other business vehicle. An accountant with expertise in small business accounting in Sydney or elsewhere in Australia may be able to save you thousands or more in tax every year.
For example, you may be able to split business or investment income between family members or friends to reduce the overall tax paid. You may also be able to make use of CGT concessions in the event of a future sale.
2. Use Business Concessions
All businesses are eligible for a range of concessions, with some concessions specific to small businesses which have a turnover of less than $2 million. These ‘small business entity concessions’ can cover income tax, capital gains, and other areas that significantly reduce your business’s tax liability.
Accountants in Sydney and elsewhere are qualified to provide advice on an effective tax reduction strategy by helping you make use of specific business concessions.
3. Maintain Accurate Records
It almost goes without saying that the maintenance of accurate bookkeeping records complement any tax reduction strategy. Correct, accurate, and up-to-date financial records facilitate good business management. They allow you to have a better picture of your business’s financial status, helping you make more effective decisions.
As time is an essential feature of cash flow and tax compliance, accurate and up-to-date records also assist with timely tax planning and deployment of reduction strategies.
4. Invest in Your Business
If you’re looking to grow your business, it’s useful to remember that expenditure in assets, marketing, new equipment, and other investments are all tax effective. While tax shouldn’t be the sole reason for making an investment, it can inform every investing decision you make, so that you’re aware of how tax advantages can impact investment viability before you make the decision.
5. Check Staff Bonus Payments
Bonuses to staff should be paid before the end of the financial year to allow for a deduction that year. For planning purposes for the next year, you may find it useful to arrange for future bonuses to be paid within the year to maximise deductions.
6. Maximise Super Contributions
Superannuation contributions are, of course, tax deductible for your business. As these contributions are tax concessionally within the superannuation fund, it makes strong sense to maximise contributions. Check the current superannuation contribution limits ($50,000 for most people, or $100,000 for those aged over 50).
7. Dispose of Fixed Assets
If your business has fixed assets that can’t be used anymore, it’s a good idea to claim a deduction for the written-down value and scrap the item. Business need to write-off the item on or before the last date of the financial year to claim.
8. Delay Income and Bring Expenses Forward
Where possible, delay your income and pay expenses to maximise your tax deductions for this year rather than waiting until the end of the next financial year to benefit from the deduction.