Every dollar you can save in tax is another dollar to reinvest in your business, or pay for that well-earned holiday. But if you don’t know what you can and can’t claim, it makes it almost impossible to take action. Here are seven sure-fire ways to minimise your tax bill.
1. Hold off on invoicing
Sometimes it’s the things that you don’t do that can save you a bundle. For instance, hold off on sending out some invoices until after 1 July and you could possibly offset any tax liability.
“If you have the ability to raise an invoice after 30 June, this will allow you to defer your tax liability to the following financial year and defer tax payable on that income for another year,” says tax expert Keith Robinson of HLB Mann Judd. The big tip here, of course, is to keep in mind your tax bracket for both financial years. You want to be certain that you won’t be taxed at a higher rate on the deferred income.
2. Turn your car into a lean, mean tax machine
Hold off on buying a new car until 30 June 2012 and you can officially turn that work vehicle into a lean mean tax deduction machine. That’s because in the next financial year, small businesses will be able to claim up to $5000 as an immediate deduction for buying a motor vehicle. The rest of the value of the vehicle can be pooled in the general small business pool – depreciated at 15 per cent in the first year, then 30 per cent.
3. Write off bad debts
For a business to get a tax deduction on its bad debts, it must physically write off the debt prior to 30 June. To write off a bad debt you’ll need to show it as income first. Adrian Raftery, Mr Taxman and author of 101 Ways to Save Money on Your Tax – Legally! ($24.95, Wrightbooks), says the easiest way to do this is to put your decision in writing, such as a board minute. “You’ll also need to show that you have made a genuine attempt to recover the debt to prove that it is bad.”
4. Scrap stock
Got some old plant or stock that your business simply can’t sell? Then write it off before June 30 and get a tax deduction for it this year. “This will give you a tax deduction equivalent to the tax written down value of the asset at the beginning of the financial year,” says Robinson.
And if your business’s aggregated turnover is less than $2 million, then you’re able to immediately write off assets costing less than $1000 (increasing to $5000 in 2012–2013).
5. Super deals
Why pay up to 46.5 per cent in tax on your drawings out of the business when you can pay just 15 per cent? For business owners aged under 50, you can put up to $25,000 per year into superannuation and it will be taxed at only 15 per cent. If you’re aged 50 or over, and have less than $500,000 in super, you can contribute up to $50,000 each year.
The big tip here is to get in your contribution before or on 30 June. As Robinson says, this all comes down to how you make the payment.
“If an employer was to make an Electronic Funds Transfer on 30 June 2012, technically this amount would not be deductible in the 2012 financial year as the funds would generally be received by the superannuation fund in the following financial year,” he explains.
6. Know your concessions
If the turnover of your business is less than $2 million, you can get some great tax concessions, including:
- Depreciating low-cost assets in a general small business pool at a rate of 30 per cent
- An immediate deduction for prepaying expenses up to 12 months in advance by
- 30 June (such as leases, interest, rent, business travel, insurances and subscriptions)
- The entrepreneur tax offset equal to 25 per cent of the tax payable of your business income if your annual turnover is under $50,000. This phases out once your turnover reaches $75,000 and will not be available after this financial year.
7. Claim before spending a cent!
Just because you haven’t paid for something doesn’t mean you can’t claim it. Raftery says businesses can get an immediate deduction for certain expenses that have been “incurred” but not paid by 30 June 2012, including:
- Salary and wages — claim the number of days that employees have worked up to 30 June 2010, but have not been paid until the new financial year
- Directors’ fees — claim a tax deduction for directors’ fees that are “definitely committed” to at 30 June and have passed an appropriate resolution to approve
- the payment
- Staff bonuses — claim a tax deduction for staff bonuses and commissions that are owed and unpaid at 30 June where the business is “definitely committed” to the expense
- Repairs and maintenance — claim repairs undertaken and billed by 30 June but not paid until the next financial year