It’s coming. With just a handful of short weeks to go until the end of the year, time is running out for SMEs to save on their tax bill.
But finding ways to reduce your taxable income isn’t always an easy prospect for small businesses during this time of year. With compliance issues, BAS, GST and updated payroll information to process, trying to find ways to save on tax can be a daunting prospect.
Fortunately, it doesn’t have to be.
H&R Block Director of Tax Communications Mark Chapman says SMEs should start thinking about how they can implement tax-saving strategies now, while at the same time ensuring they fit within the company’s existing strategy.
“If you’re looking to make some capital purchases, you might as well do it now.”
Chapman dug into his extensive history with SMEs and found some methods for businesses to start saving. Without a doubt, there’s something here for every SME to take note of before the calendar hits July 1.
The key way small businesses have been saving tax over the last year is through the $20,000 instant asset write-off. Now’s the time to take advantage of it.
“If you’re moving towards the end of the tax year, you can claim the deduction in the current year,” says Chapman. “So now’s the great time for businesses to go out and invest in pieces of tech, computers, tablets, phones, Wi-Fi networks – anything that costs less than $20,000.
“It’s also great for things like office furniture and potentially a vehicle, if you need one for your business.”
But it isn’t just large items that businesses can take advantage of. Chapman says a spending spree for stationary or other related materials under $20,000 from general suppliers like Officeworks can still be written off.
Every business has bills to pay, but paying them a little earlier? It actually makes sense. As Chapman explains, paying your expenses earlier means you’ll be able to claim the entire cost in the current financial year.
“That includes subscriptions to professional bodies, magazines, insurance bodies which will run through to next year, and so on,” he says.
It’s worth noting that if you have any regular expenses, such as updating software or buying general equipment while you’re stocking up on office consumables, putting in the effort to buy them now is worth the tax savings.
Many SMEs may not think about putting superannuation contributions through until the required date. But Chapman says it’s worth prepaying those contributions before the July deadline, and before June 30, in order to gain the tax deduction.
“Businesses just need to make sure the contribution actually flows through into the super fund before June 30,” says Chapman.
Businesses should also consider deferring income into the next financial year, Chapman says, but SMEs need to be careful – if invoices are deferred for too long, the ATO will keep an eye on you.
However, given the corporate tax rate will be falling to 27.5% in the next financial year, Chapman says this is a particularly pertinent year for SMEs to defer their income.
“But if you hold off on invoicing for too great a period, the ATO may raise their eyebrows,” he says.
“There are catch-all rules around anti-avoidance. If you were looking to defer invoices from January into July, that would look slightly strange.”
Still chasing some unpaid invoices that you don’t think will ever be paid? Write ‘em off and get a tax saving in the process, says Chapman.
“Obviously it’s never good if you have bad debtors, but if you have them, get the tax relief as quickly as you can.”
Written by: Patrick Stafford
Officeworks is Australia’s leading retailer of office supplies, technology, furniture, education resources, art supplies and Print & Create. Officeworks offers more than 40,000 products on its website, catering to micro, small and medium business customers to help them start, run and grow their business. With everyday low prices on quality products and services, including tech-support by Geeks2U, you’ll find everything you need at Officeworks.
