Tax time can be an incredibly stressful time of year, but if you take the right steps beforehand and throughout the year, you can take advantage of tax-time planning to help ease some of that stress. For many small business owners, tax time can be daunting as it usually means a hefty tax bill is coming.
Below, are our top tips for reducing your tax bill and what you need to know moving into the new financial year.
Tax Time Tips for Small Business Owners
Keep Records: Recording any potential deductions throughout the year will streamline the process at tax time. The simplest way to do this is to have a logbook, an excel spreadsheet, diary or a folder to keep your receipts, and make sure you are dedicated to recording these deductions as this is going to help come tax time.
Asset Write Off: You may be able to claim the full cost of the taxable use portion of an asset, this may reduce your taxable income.
Bad Debts: Businesses can claim deductions for bad debts, if you can show that a debt has been written off before June 30, and it was originally income, you can claim a tax deduction.
Wages: Expenses such as wages and bonuses can be claimed as a deduction even if they are not paid by June 30. Provided that the work is completed prior to June 30, and you are committed to paying them.
Pay Super: If you pay your staff superannuation before June 30 you can receive a tax deduction. Don’t forget to pay yourself super too!
Motor Vehicle: To be eligible to claim motor vehicle expenses, you must keep a logbook to record all private and business travel.
Consumables: Purchase consumable items such as stationery, computer, and office supplies before June 30 to get your deduction sooner.
Concessions: Research small business concessions and prepay expenses like loan interest, insurances, rent and subscriptions before June 30 and you can receive a full tax deduction.
Working from Home: Do you operate a home-based business? Make sure you know what you can claim! You can only claim deductions for the portion of your expenses that relate to running your business, this includes, the cost of using a room, internet costs, depreciation on furniture or equipment, and repair costs.
Stock: Assess your stock and inventory and identify damaged or obsolete stock as this will impact the value of the trading stock and profit margins.
Government Grants: Any government grants, payments, and stimulus that your business may have received due to COVID-19 may affect your tax return. Some payments are no longer considered an assessable income, and this will affect what you can claim.
Being prepared to submit your tax return and understanding what you can claim is an important element to getting the most out of your tax return.
Welcoming the New Financial Year
As a small business owner, it doesn’t just stop with tax time, making sure you are ready for any changes that may be occurring in the new financial year is going to set you up to make sure the following tax year runs smoothly. Here are some key changes happening from July 1st, 2022:
Superannuation: There are two important superannuation changes as of July 1. Firstly, employees can be eligible for super guarantee (SG), regardless of how much they earn, as the $450 per month eligibility threshold for when SG is paid has been removed.
Secondly, the SG rate will increase from 10% to 10.5%. Employers will need to use the new rate to calculate super on payments made to employees on or after July 1, even if some or all of the pay period is for work done prior to July 1.
For these changes to come into effect be sure to update your payroll and accounting systems to ensure that you continue to pay the right amount of super to your employees.
Single Touch Payroll (STP) Phase 2: Single Touch Payroll reporting has been expanded. Known as STP Phase 2, this expansion means that employers need to start reporting extra information to the ATO each time they run payroll. Depending on when your digital service provider is set to update their payroll product, will determine when you can start reporting. If you haven’t started Phase 2 reporting and don’t know when you can, check with your digital service provider! Make sure you are prepared for these changes by checking how they are affecting your payroll systems and review how you must report things.
Here at Whitson Dawson, we understand that tax time can be stressful, and we’re here to help with all aspects of tax. Speak to our friendly team today about how we can remove the headache from tax time.
Simply phone the office on (07) 4957 2985 or email firstname.lastname@example.org
Remember, managing your finances doesn’t have to be stressful! We’re here to help.
Until next time,
Whitson Dawson – Your local accounting experts