The end of the financial year often makes company owners anxious, as large impending tax bills can seriously reduce hard-earned profits. However, legitimate tax planning provides various ways for businesses to operate efficiently and retain more income.
This comprehensive guide outlines numerous tactics companies can implement to minimize their tax burden legally.
Thoroughly examining permissible deductions is vital for lowering taxable revenue. Meet with advisors early to identify write-offs related to regular business activities.
Some categories of common deductible expenses could be:
- Interest paid on loans, credit cards, or other finance arrangements used for business purposes.
- Motor vehicle costs like fuel, registration, insurance, maintenance, etc, for company travel. Maintain a vehicle logbook for evidence.
- Supplies and equipment: Things like office consumables, tools, protective clothing, and computer accessories needed to conduct business activities.
- Any fees for accounting, tax, legal, HR, consulting, or other expert advice required for operating the company effectively.
- Software and technical services, including cloud computing subscriptions, license fees for proprietary platforms or databases, website hosting expenses, and related costs.
- Mobile phone plans and internet services with clear business usage.
- Insurance premiums include public liability, professional indemnity, product insurance, etc. But not health or life insurance.
- Building repairs like plumbing, paint, electrical, and equipment/machinery upkeep expenses.
- Advertising and promotion fees, online search ads, social media campaigns, content production costs, and more.
- Staff training: external course fees, materials, travel, and potentially lost working time related to enhancing employee skills.
Another key tax reduction approach is accelerating investments in essential equipment, machinery, vehicles, and other depreciable assets used predominantly for business activities.
Small businesses (with turnover less than $10 million annually) purchasing assets valued up to $20,000 before June 30 are eligible for full cost deduction. Larger purchases can be depreciated over time. Carefully timed additions of key business assets can optimize annual savings.
When preparing company tax returns, you can carry forward any previously posted net operating losses. These losses due to unforeseen events can be carried forward indefinitely to offset profits when you return to profitability in future years. This directly reduces future taxable income.
If you carefully plan and delay your customer invoice beyond June 30, that revenue will be recognized in the next financial year rather than the current one when calculating taxable income. However, doing so will impact cash flow, which needs to be considered.
The model projected implications on profitability, liquidity, and tax liability across periods to find optimal timing that works for your situation. Liaise with financial advisors to check accrual methods and impacts.
Despite best efforts, occasionally, customers fail to pay for delivered goods or services. Where reasonable collection attempts have failed, these bad debts can be deducted from taxable revenue after formally:
1. Showing the debt was previously recorded as income
2. Demonstrating recovery efforts have ceased
3. Documenting the write-off decision
Stringent processes apply, including dated invoices, payment demands, reports, and bad debt write-off authorizations. Hence, transparent tracking is necessary if scrutiny is required later.
Making extra discretionary contributions to employee super funds before June 30 allows deducting the payments from taxable income in that year. This requires having surplus cash to contribute above compulsory Superannuation Guarantee amounts.
Investigate rules around carrying forward unused concessional contributions from the last 5 years that expired. Increased payroll deductions near year-end can also grow tax-deductible super payments.
As a small business, verify eligibility for government tax offsets of up to $1,000 annually when filing company tax returns. The Tax Office automatically calculates and credits offsets owed based on your reported situation, directly reducing overall tax bills.
As a sole trader or small enterprise, ensure you capture this benefit through accurate declarations and submissions well before due dates.
Federal and state programs periodically introduce stimulus incentives, often targeting asset investments or employment initiatives. Research current arrangements in your industry for applicable rebates or grants.
For example, exporters accelerating international growth may qualify for substantial government assistance, while manufacturers adopting industry 4.0 technologies may receive capital allowance boosts alongside training credits. Such assistance aims at broader public policy goals but can also generate tax relief.
Before submitting company tax returns, thoroughly review all entries alongside advisors to avoid future problems with the Tax Office. Detecting reporting discrepancies leads to paying outstanding taxes plus interest and penalties. Delays in submitting returns by due dates incur further interest on any final balances due.
Proper multi-pronged tax planning undertaken well before filing deadlines allows businesses to legally optimize available deductions, carry forwards, offsets, and other incentives.
However, you mustn’t take this guide as the last word on tax preparation and should consult specialists to tailor strategies based on your situation.