It’s hard to believe we are already in the final quarter of the financial year, so if you’re worried about how much tax your business needs to pay this year, make sure you take the time to do something about it.
If you are like me and would rather spend your money on shoes than taxes, then here are the first of my 15 easy tips to save tax…
- Embrace the cloud: There was a time when you had to keep every paper receipt tucked away in an envelope in an overstuffed filing cabinet. Now you don’t need to keep paper receipts, and all of your deductions can be stored safely in the cloud. If you’re a business you might want to consider a cloud-based service such as Xero paired with Receiptbank or Shoeboxed.
- Incur or pay for deductions before 30 June: This one seems obvious, but every year I meet so many people who simply forgot about buying a briefcase, upgrading their mobile phone or making a donation until July, when it’s too late. The best idea is to make a list of what you need, and a plan to buy it well before the end of June when you may well forget.
- Understand Budget changes: Be sure to take advantage of changes in the Budget – whether it’s the fact that from 1 July you will be classified as a small business if your turnover is less than $10 million (up from the current $2 million threshold), or that personal thresholds are increasing from $80k to $90k. Do some research around how to make the most of these changes.
- Buying assets: If you’re a small business you can write off in full any asset that costs up to $20,000. If you know you need to buy equipment or computers in the next few months, consider bringing forward the expense before 30 June.
- Delay invoicing before 30 June: If you are a small business and you know that a customer pays you promptly and that you will receive the money before 30 June, then delay invoicing until 1 July. Similarly, if you’re a large business, consider delaying your invoicing until after 1 July to defer tax as well.
- Incur expenses: Many small-business owners think they need to pay for an expense in order to receive a tax deduction, but all you need do is incur it. This goes for both large and small businesses. Order any equipment, stationery or materials you need, and make sure you receive the bill dated on or before 30 June.
- Prepay expenses: If you’re a small business you might consider prepaying expenses such as rent or insurance for up to 12 months.
- Stock on hand: If you have slow-moving stock, consider writing it off before 30 June. For the rest of your stock, you have the choice of valuing it at actual cost, replacement cost or market value, so be sure to choose whichever will give you the lowest price.
Next week we’ll look at seven more tips on reducing your tax return.
Melissa Browne, founder, The Money Barre, and author of “More Money for Shoes” and “Fabulous But Broke”
