Accountants Echuca

Tax Planning – Getting Ready For Tax Time

It’s essential for small businesses, sole traders and primary producers to have a thorough tax plan in place prior to 30 June. Accountants can assist you to develop tax plans that save time, effort and stress, enabling you to make informed and prudent strategic decisions that place you in the best position to maximise your tax return. In this blog we will cover off on the tax planning essentials you need to know in the lead up to meeting with your accountant.

As we enter the start of June, the beginning of tax time no longer remains a distant date but a more immediate reality requiring patience and attention to detail. Looking over your taxable income (your business’s assessable income, minus any allowable deductions) for the current financial year 2021-22; and your projected / expected taxable income for 2022-23 is a positive start in making sure the tax plan and strategy you develop with your accountant ensures you pay the right amount of tax. 

Profit & Loss

Tax planning ideas accountants may suggest if you’re expecting a higher than projected income this year

Discuss with your tax accountant mitigation and reduction strategies if you’re expecting a greater income this financial year, compared to your projected income for the next financial year. Some ideas you could consider and possibly discuss include:

  • Pre-paying some of your 2022-23 expenses (such as your rent, insurance or profession specific subscriptions) in the 2021-22 financial year. Up to 12 months of the following year’s expenses can be deducted in the current tax year
  • Employing depreciation measures like temporary full expensing, which allows for the deduction of business costs for eligible depreciating assets first held, used or installed ready for use for a taxable purpose between 6 October 2020 and 30 June 2023
  • Delaying some of your invoicing for the current tax year
  • Making extra voluntary superannuation contributions
  • Reviewing your ledger of outstanding debts for those that are unlikely to be recovered from a customer or debtor. Such unrecoverable income is otherwise known ‘bad debt’ 
  • Deducting any business establishment expenses or fees you may have incurred

Tax planning ideas accountants may suggest if you’re expecting a higher than projected income next year

If your income for the 2022-23 financial year will likely be higher than your income this financial year, consider:

  • Creating an inventory of necessary business equipment you will require based on your business’s needs / strategic plan. Depending on the items and business plan you have, some (or all) of these items could be purchased this year
  • Identifying any invoicing that could be brought forward into the current financial year

Tax Planning Strategy

Suggestions for small business owners:

To help facilitate discussion about your longer-term taxation strategy, accountants can talk to you about:

  • Accounting for GST on a cash basis – this option allows you to pay GST in the period you actually receive payments as opposed to when issuing your invoice. This strategy can be employed where businesses need to improve their cash flow
  • Small business restructure rollover – may be applicable if you are recognised as a small business entity (SBE) and you wish to transfer active business assets to another SBE as part of a genuine business restructure (where no change in the asset ownership takes place)
  • Temporary full expensing – as discussed above, this strategy allows you to deduct the business portion of new or second-hand depreciating assets. Where you don’t claim, or are unable to claim this deduction, you could still be able to claim a deduction under the instant asset write-off or backing business investment – accelerated depreciation

The ATO has more information on economic stimulus measures here

Making sure your tax information is current and accurate

Correct and up to date information helps make better informed tax decisions and ensures you get the best tax return. Consider the suggestions below as places to start in making sure your tax information is correct: 

  • All log book data for your business vehicles  
  • Current stocktake data if your business carries stock and your, estimated closing stock (and opening stock) is more than $5,000
  • Review your annual GST private apportionment claim to accurately reflect the balance of business and personal use of business assets
  • Any COVID-19 stimulus payments like JobKeeper as they will need to be incorporated in your business income tax return

Supporting businesses impacted by recent disasters

Ways in which accountants can help small business owners:

Speak to your accountant about how the ATO may be able to provide further assistance with things like: 

  • Locating lost tax information and helping lost or damaged tax records
  • Re-issuing official documentation like activity statements, notices of assessment and tax returns
  • Granting extra time to lodge tax forms and activity statements 
  • Establishing payment plans 
  • Forgiving penalties or charges for an agreed period
  • Prompt refund payments

In the event your business was affected by a recent disaster, call the ATO’s emergency support line 1800 806 218 or visit their website.

Make your tax time appointment now

One last piece of advice, book in your tax time appointment now. The first quarter of the new financial year is a very busy time for accountants so don’t put it off.

Should you require more general advice and guidance, book your free 30 minute consult with one of our tax accountants or financial planners and let’s get your business performing at its best.

 

Disclaimer: The information above is general in nature and should not to be considered as personalised taxation or accounting advice. Please consult our experienced tax accountants as taxation law can affect your business differently from year to year.