16 Smart Ways Your Business Can Save Money at Tax Time

Having a healthy cash flow is critical for small business, so the last thing you need is a huge bill owing to the Australian Tax Office (ATO) at the end of the financial year.

When you’re working as an employee, tax is deducted from your gross wage each pay. But when you’re in business, tax obligations can sneak up on you. That’s why it’s important to know exactly how to minimise your business tax while still staying on the right side of the ATO.

The following information is for Small Business Entities (SBEs) with aggregated turnovers of less than $10 million. Read through the suggested ways to save, and then book a time to discuss your options.

#1 Structure your business correctly

The small business company tax rate for the 2024 financial year is 25%, and some (but not all) businesses can save tax by operating their business through a trust structure with what’s known as a “bucket company”.

For others, a partnership structure or a discretionary trust with individual beneficiaries can be excellent tax-effective ways to split profits. Of course, profit-splitting is not necessary for every small business, and for some a sole trader structure is best.

Other considerations need to be taken into account when determining the right structure, so discuss with us the best options for your unique business.

#2 Asset write-offs

Small Business Entities can immediately deduct the full cost of assets costing less than $20,000 if they are installed and ready for use between 1 July 2023 and 30 June 2024. However, there are a number of assets that don’t qualify for the instant asset write-off as they have their own set of rules, such as building construction costs.

#3 Write off bad debts

Review your accounts receivable for old and unrecoverable debts. You can get a tax deduction or the full amount in the year you decide to write-off the debt. You’ll need to make sure you’ve met the requirements, so talk to us first.

#4 Pre-pay expenses

Review your expenses to determine if any of your expenses such as rent, insurance, or subscriptions could be prepaid. Note that as a small business, you can get a tax deduction for expenses you prepay as long as the prepayment does not cover a period of more than 12 months in advance.

#5 Make personal super contributions

Paying extra super can be a good way to minimise your tax obligations, but there are certain conditions that apply including deduction caps. Discuss this with us well before the 30th of June (preferably no later than May) to maximise your tax planning opportunities.

#6 Pay employee super in full and on time

If paid on time, superannuation paid to employees is tax deductible. If you don’t pay your superannuation, you not only miss out on the tax deduction, but the ATO can impose some hefty penalties and interest.

#7 File BASs and Tax Returns on time

Avoid ATO penalties by making sure your BASs and Tax Returns are lodged on or before the due date!

#8 Write off inventory at stocktake

Your business will be entitled to a tax deduction if you write off inventory that is obsolete, slow-moving, or has been subject to theft. Take a close look at your inventory at 30 June.

#9 Defer Income

If possible, defer issuing invoices until after 30 June. This pushes tax payable to future years, which is sometimes necessary for current cash flow purposes.  

#10 Take advantage of the Small Business Technology Investment Boost

Small businesses with an aggregated annual turnover of less than $50 million will be allowed an additional 20% tax deduction to support their digital operations and to “digitise” their operations.

The boost applies to eligible expenditure incurred between 7:30 pm AEDT on 29 March 2022 and 30 June 2023. The boost is for business expenses and depreciating assets capped at $100,000 of eligible expenditure per income year.

Contact us to discuss the eligibility criteria as it applies to your business.

#11 Take advantage of the Small Business Skills and Training Boost

Small businesses with an aggregated annual turnover of less than $50 million will be allowed an additional 20% tax deduction for external training courses delivered to employees by registered training providers. The boost applies to eligible expenditure incurred from 7:30 pm AEDT on 29 March 2022 until 30 June 2024.

Contact us to discuss the eligibility criteria as it applies to your business.

#12 Buy the right vehicle for your business

If you’re in a company structure and wish to purchase a vehicle, have a chat with us about your options, such as FBT exempt vehicles.

#13 Keep a logbook for your motor vehicle 

You can claim motor vehicle expenses when used for business. To take advantage of this deduction, keep a logbook for 12 weeks to identify the percentage that is attributable to your business. Note that the cents per km claim (85 cents in the 2024 financial year) does not require a logbook, but is capped at 5,000km and therefore can sometimes result in a lower tax deduction.

#14 Minimise Capital Gains Tax (CGT) with forward planning

There are certain CGT concessions for business owners (and for individuals, too!), and sometimes a discussion with your accountant prior to selling your business, investment property, or other CGT asset can save you tens of thousands.

#15 Avoid using your company for personal expenses

Using a company for a shareholder or their associate’s personal expenses – for example, cash withdrawals, personal rent, school fees, or groceries – can lead to problems at tax time. A company is a separate legal entity, and the money needs to be paid back within a certain timeframe to avoid tax consequences.

#16 Use the right software

Using the right software can not only simplify your business but also save you money. As Platinum Xero Partners, Madden Partners can get you set up and show you how to use this simple online software. We can even do the bookkeeping for you!

This represents general information only, and these are just some of the ways to manage how your money is taxed. Other options may be available, so make sure you get in touch so we can review your specific structure and circumstances to get the most out of your business.

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