10 Tips To Minimise Your Business Tax And Maximise Your Company Tax Return
Added: (Sun Dec 19 2021)
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For businesses to remain legally compliant, paying the right amount of tax and filing a tax return on time is a must. In Australia, companies are subject to a federal tax worth 30% of their taxable income; 25% for small and medium businesses for the year 2021-2022.
If you’re running a business, maximising your company tax return is essential to boosting your bottom line. Here are 10 tips on how you can minimise your business tax, get the most of your tax incentives, and continue to be a thriving and responsible business owner.
File your tax return accurately and on time. There are penalties and fines that come with filing a return with erroneous data and/or submitting one beyond the deadline. The most fundamental things you need to ensure are accuracy, honesty, and punctuality.
Claim what you can. Expenses related to business travel, work-from-home claims, depreciating assets such as cars and buildings, employee salary payments, theft. There are different deductibles that businesses can claim so they can maximise their tax benefits.
Take advantage of unpaid invoices. Did you know that if you have unpaid invoices, you can use them to your advantage? With lockdowns rendering quite a number of customers unable to pay, you as a business owner can write those off as a bad debt — effectively reducing your taxable income.
Avail of instant asset write-offs. In case you’re not aware of it yet, small businesses can avail instant asset write-offs for capital assets (the threshold amounting to $30,000). This means that you can gain capital assets while being eligible to deduct them against your yearly income. And do you know what else you can write off? Damaged or obsolete stock. So it really pays to thoroughly review your inventory.
Know if you’re eligible for an income tax offset. Before filing your company tax return, check first if you’re eligible for this tax incentive. If your revenue is less than $5 million, you can pay $1,000 less on your tax. In the coming years, the government is considering increasing the amount of income tax that can be offset to incentivise businesses to innovate.
Make use of the temporary full expensing scheme. The government has various depreciation measures that enable businesses to claim an upfront tax deduction for their assets. Apart from the mentioned instant asset write-off, you can take advantage of temporary full expensing. This allows you to deduct part of your eligible depreciating assets — both new and second-hand.
Consider prepaying your expenses next financial year. Had a great financial year? You can prepay some of your expected expenses next year (e.g. Subscriptions) and include those in your deductibles for the current year.
Review your debts. In a previous bullet, it’s mentioned that you can consider unpaid invoices as bad debts. Well, it’s important to know that those you’ve incurred in the current financial year aren’t the only debts that you can write off. If there are other unrecoverable debts — regardless of when you’ve invoiced them — you can still claim those as a tax deduction.
Maximise your super contributions. In Australia, the cap for concessional superannuation for all individuals is $25,000. If you top up your voluntary super contributions and maximise the said allowable amount, you can significantly reduce the amount of tax that you’ll pay.
Get expert help. Filing a tax return that maximises all the incentives you’re eligible to is, well, taxing. To make the process more efficient, convenient, and cost-saving on your part, you should hire tax accounting professionals. They will also help you ensure that what you’ll file is accurate and legally compliant.