We’re at that time of year again. The daunting time which causes all small business owners to shiver without fault. It’s tax time. It really is the norm for businesses to deem the end of financial year as one of the most stressful months of the year and even a waste of time. However, see this in a positive light by taking the opportunity to earn huge savings from the returns of your taxes. To successfully know how to maximize tax time, understand the changes that account for this current year, as well as the concessions that can be obtained simply by the type of business that you are running. Here are 8 business tax tip breaks to earn more savings this end of financial year.
- Keep organised records
A great tip to attain greater savings is by ensuring that your records are well-presented and detailed. They should be gathered and organised to make the process of claiming deductions easier. The records that you should be keeping include sales receipts, credit card statements, bank statements, expense invoices, employee records, asset purchases and vehicle records. Whether your records are kept in paper hardcopy or electronically, you must ensure that your records are safety stored as you may be asked for supporting records. You should also keep all your written evidence to prepare for the next few years ahead. Your written evidence must be kept for five years from the date you lodge your tax return.
- Claim your deductions
Once you have your records in order, you will be able to claim them for deductions.
It is critical to research and know which deductions that you can claim. You must ensure that the invoices and statements are expenses to your business and not for your personal use. You will also need a record to prove your claim for each of the deductions that you wish to earn.
- Passive income deductions
Another way that you can claim your dedications is through property investment. If you are gaining wealth through the property as another form of income, you can also claim interest expenses, rental expenses and depreciation deductions if you are investing in property. Ensure that you get the best rate of taking out a home loan through HashChing, to maximise the return that you receive during tax time. You are also able to earn deductions through earning interest as well as dividend and share income expenses.
- Tax Software
To stay on top of your records throughout the years, you may opt to file your records electronically through an online database. Use tax software to organize your documents and data in a neat and organized way. This will allow you file your documents and display them all in one platform and access them easily when required. Software such as TurboTax, TaxAct and QuickBooks can prepare and file your income tax returns.
- Stay updated with ATO
The Australian Taxation Office (ATO) will often disclose new rules to the tax times and what your business should be aware of when claiming deductions. Keep updated with relevant changes that may apply to you and your business such as potential concessions you can gain or no longer able to gain. With the changing workforce and varying industry sectors, it is difficult to keep in place what should be allowed and what shouldn’t be allowed when claiming at tax. You should also consider the areas that are on the ATO’s watchlist were there has been increasing ambiguity what business owners are able to claim. Areas include working at home as well as laundry deductions where the type of use can play into your eligibility of claiming your deduction.
Make sure that you get your superannuation of time. Ensure that you pay your super early and before the end of financial year to be able to claim for your deduction. You must also ensure to pay any outstanding superannuation entitlements not only for the tax breaks but also for the interests of your employees.
- Pay the correct company tax rate
Depending on your business’ annual turnover, you may have to continue to pay tax at 30 percent. However, if your annual turnover is less than $25 million, you can qualify for the tax that is paid at 27.5 percent. Although, an increase in proposed regulations can change the rate of tax that you will have to pay. You may no longer be eligible to pay at the lower company tax rate threshold if more than 80 percent of your annual turnover is from passive income. You should always be aware of changing legislation as well as your company’s financial position to pay the correct company tax rate.
- Consider small business concessions
During tax time, there is a range of benefits that you are entitled to. New small businesses owners that are unincorporated can claim the small business income tax offset if your revenue is under $5 million, you can claim up to $1000 where the offset is currently 8% of tax payable on your business income. You are also eligible for immediate deductions of asset purchases up to $20,000 through the instant asset write-off.
As a small business owner, you are eligible for tax breaks and benefits. So why not use this to your advantage?