It’s tax time again – for many entrepreneurs, the most dreaded time of the year.
With consumer confidence waning and a global financial market that’s ready to fall at any moment, entrepreneurs could be forgiven for stressing out a little more this year when it comes to their tax bills.
But preparing for tax season and the new financial year doesn’t need to be a stressful experience. We’ve assembled a panel of tax experts to help you get the most out of this time of year – and possibly save you some much-needed cash.
Here are the top 15 tax tips from Pitcher Partners tax partner Theo Sakell, Institute of Chartered Accountants general manager Yasser El-Ansary, Pitcher Partners tax partner Ray Cummings and Crow Horwath national tax director Tristan Webb.
Businesses want to reduce their tax bills as much as possible, and one of the best ways to do that is through the deferral of income.
Pitcher Partners tax partner Theo Sakell says SMEs should look for situations where they can defer income into the next financial year, which will save them having to pay up.
“If you want to defer it, you can end up paying the tax 12 months later,” he says. “Of course, if you have losses, you can also look for ways to bring income forward.”
“It depends on the nature of your business and what you’re really wanting to do.”
The other thing you’ll want to bring forward is deductions. Experts say if you have anything that you’re looking at buying in the new year, then make sure you can bring it into the current year and deduct it.
There have been quite a few changes to the way trusts are set up and operated this financial year, and entrepreneurs will need to know exactly where they stand or they might end up paying excessive tax bills unnecessarily.
Pitcher Partners partner Ray Cummings says there are now laws about how trusts can distribute funds with regard to tax file numbers.
“There are new rules, and now when trusts are distributing income to a beneficiary they need to quote the tax file number, and then the trust has to report the details.”
“There were certain concessional rules that allowed trusts to meet these notifications, but it could well be new beneficiaries you’re thinking of distributing to haven’t reported their TFN.”
The Federal Government introduced a new loss-carry back scheme in the budget last month, which will allow businesses to claim losses of up to $1 million based on tax they have paid in the previous two years.
Institute of Chartered Accountants general manager Yasser El-Ansary says while legislation still hasn’t been introduced for the scheme, businesses can still start preparing for it.
“The loss carry-back will only be available for businesses that have paid tax in the 2011-12 income year, and then find themselves in a position where they are in a loss the next year.”
“So while we still don’t have more details about how exactly the scheme will work, it’s a good idea to start preparation.”
“If businesses find themselves in a position where they have control over whether or not profits are derived in the current income year, as opposed to the next, they ought to think about the potential advantages that may be worth in bringing those profits to account in the current year.”
You may not be thinking about bonuses until the end of the year. But according to these experts, even if you have an idea of what you’re paying everyone, you should write it down and then claim a deduction on them.
Ray Cummings says you should document the decisions you’re about to make regarding bonuses as soon as possible. “Don’t let that get away from you,” he says.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
