Often with a booming business comes a burgeoning tax bill.
In 99% of situations, businesses experiencing a growth spurt, almost always get slapped with a huge bill come tax time.
So how can a business reduce their tax bill and implement strategies to ensure they don’t get left with a hefty tax bill? Here are some of the main ways you can reduce your bill.
Defer your income
Consider deferring any invoices at the end of the financial year to the following year so you can take advantage of tax breaks. It’s important to note that deferring for too long means you could end up on the Australian Tax Offices (ATO) watch list.
The Federal Government last year announced that for the 2017–18 income year, the lower company tax rate decreased to 27.5% for companies with a turnover of less than $25 million.
Write off bad debts
Chasing invoices you think will never get paid? It’s crucial you write off any bad debts, so you can get some tax relief. A debt that remains unpaid is an allowable deduction but it must be included in as assessable income.
Putting your businesses superannuation contributions through before the June 30th deadline should earn you a tax deduction. Make sure the contribution actually flows through into the super fund before June 30 so you can claim the deduction.
The golden rule: keep up-to-date records
The easiest way to end up on the ATO’s bad side is by keeping sloppy records. By keeping up-to-date records, you not only minimise tax challenges but it helps you run your business effectively.
Having the right accounting software and filing system are critical components come tax time. Not to mention the fact that keeping your business organised is a tax deduction in itself!
The ATO can help…sort of
The ATO allows businesses to make tax prepayments and enter their pay as you go (PAYG) instalment scheme. A tax prepayment is a voluntary payment made in advance for an expected tax bill. You can make prepayments at any time and as often as you like to make it easier for you to manage your tax bill.
Also, don’t panic if your company can’t pay a tax debt when it is due – but make sure you lodge your returns. The ATO is relatively generous when is comes to setting up payment plans for any outstanding monies owed.
Get expert advice
Last but not least, it is crucial that you seek expert guidance. A 2016 survey by The Voice of Australian Business revealed only 26 percent of Australian SMEs are using external consultants such as accountants in their decision-making processes.
By not using an expert you are missing out on taking advantage of numerous tax breaks that can help minimise your end of year bill.
At BDH Leaders, we pride ourselves on giving the best advice that suits your business and personal finances.