If you’re a small business, it’s that time of year to be looking at strategies to
minimise your tax.
When you’re considering strategies to reduce your tax burden, always keep in
mind that spending money to get a tax deduction is secondary to the primary
purpose of spending which is to improve profitability.
Here are some strategies you might like to consider:
$20,000 Instant Asset write-off
If your business has an aggregated turnover of less than $10 million, an
immediate deduction is available for business acquisitions of less than $20,000,
and depreciation pools of less than $20,000 can also be written off. The asset
needs to be installed ready for use prior to 30th June, 2018
For instance, you might consider bringing forward some desirable technology
It can pay to have to have a look at your depreciable assets prior to year-end to
see if any assets are no longer being used. These can be written off and their
remaining depreciable balance written off if they have been “scrapped”
The lower the value of closing stock, the lower the taxable income. It can be
beneficial to carry out a detailed stock take to get an accurate stock figure. The
value of trading stock can be reduced for obsolete or damaged stock.
To get a deduction for a bad debt in the current year, it needs to be written off in
the ledger before year end. You need to have made reasonable attempts to
collect the debt. It can pay to review your debtors’ list, especially for those more
than six months old, and identify customers who have gone bankrupt or are in
liquidation or are disputing the debt.
The tax-deductible superannuation contribution limit for the current financial
year is $25,000. This must be paid to the superannuation fund account by 30th
June to get the deduction.
While employee super for the final quarter is not payable until 28 July, it will not
be deductible unless paid by 30 June. Be careful not to pay it after 28 July, as you
will not get a deduction at all.
Prepaying deductible interest on loans for rental properties or business loans,
rent of your business premises, lease payments for vehicles and equipment etc
will bring next year’s tax deduction into this year. However, no more than 13
months prepayment are allowed for tax purposes, and you should also be
gaining some commercial advantage such as reduced interest, rent, etc for this
Repairs and Maintenance
If a repair or maintenance is going to be required sometime in the near future,
then spending money before 30th June will get you a tax deduction this year.
If you operate on a cash basis, make sure all your sales are properly accounted
for. The ATO has a major focus on cash-based businesses which don’t declare all
their turnover and use benchmarks and other third-party resources to estimate
what your sales are.
Tax Office list
The Tax Office publishes a list of small business deductions. It might be worth
having a look at it to see if you are claiming everything you are entitled to.
Although not necessarily a year-end tax strategy, there may be opportunities in
restructuring which could assist with asset protection, income splitting, estate
planning and commercial objectives. These may be best done whilst the Small
Business CGT concessions and Restructure Rollover provisions are available, and
it is preferable for these to be done at year end to simplify accounting etc. Speak
to your accountant to see if you could benefit.
It is reported that some of the most significant tax deductions get overlooked
especially for the industry you are in, so it’s worth taking the time now to assess
what steps you need to take to minimise your tax for 2018.