With the 2021 financial year coming to a close, time is running out for small business owners. As a result, a lot of Accountants are rushing to implement tax planning strategies for their clients before the 30th of June approaches.
3 Ways to Save – Tax Planning
There are 3 types of year-end strategies commonly employed in combination or on its own, to minimise the amount of taxes your business pays:
- Reduce your assessable income
- consider the possibility of delaying income to future year
- redirect income from taxpayer with higher tax rate to that with lower rate
- transfer ownership of income-producing asset
- Increase your business deductions
- take advantage of the eligibility to write off the full cost of depreciating assets
- review your old debtors if any can be written off prior to 30th June
- bring forward any planned asset purchase to current year
- review prepayments if cash flow allows
- pay employee super due for June 2021 quarter before the 30th of June
- Use of tax offsets and losses
- review prior year losses
- look into offsetting current year’s tax losses against prior year’s profits
- see if you qualify for a small business tax offset
Generally, the taxes you pay as a business depends on the amount of taxable income incurred in the financial year. Therefore, the more profit your business generates, the more taxes it will pay.
Paying tax is a good thing, because it means your business is doing well, contributing its fair share in taking care of our nation. I’m not suggesting that you should pay more taxes than you should, though.
Focus on Profits
Should minimising tax be your number one priority? Sometimes people care too much about the amount of tax they pay or how much they could save in tax instead of making the most of the amount they can keep. They are lured into spending their hard-earned income on depreciating assets, not because they need them to build their business but only to lower their tax bills.
When you run a business, the right focus should be on maximising your business profit even if it means increasing your tax bill. This is the best way to build wealth.