Last week we looked at my first eight tax hacks that will help ensure you don’t pay a cent more than you have to in your end of year return. Here are the rest of my tips…
- Pay super: Pay employees’ superannuation before 30 June to receive a tax deduction this year, and be sure you pay super for yourself. Too many business owners risk not having enough super upon retirement. My rule of thumb for how much super you should be paying for yourself? The amount that would be paid if you were to go and get a job.
- Revisit your structure: Does your business have a tax-effective structure? If you are a sole trader you have no choice but to pay tax on all the profits of the business, whereas this is not the case for other structures such as partnerships, companies or trusts. There are also asset-protection implications that make it worth considering changing the structure, and while insurance can protect you, trading via a company or trust can provide another layer of protection.
- Logbooks: Make sure your log books are up to date. For motor vehicles, this means your log book needs to be less than five years old. If you’re in a company or trust structure and you own cars in that entity, consider keeping a log book on those vehicles. Thanks to changes to FBT, the number of kilometres travelled is now irrelevant to the percentage your FBT is calculated on. A 20 per cent flat rate applies when calculating a car fringe-benefit under the statutory-formula method, regardless of how many kilometres the vehicle travels annually.
- Look into your crystal ball: If you know that next year you are going to drop income because you’re taking gardening leave, maternity leave or quitting your job to start a business, you might want to look at your tax-deductible expenses. It may be worthwhile prepaying expenses this year while your income is higher. These may include travel, insurance, interest on loans up to 12 months or insurance.
- Selling your business: If you have sold your business this year it is incredibly important to tax plan now. That’s because if you are a small business you may be entitled to small-business capital gains concessions, but you need to trigger them in order to take advantage. For example, you can pop profits into superannuation, but if you don’t transfer this amount before 30 June you’ll miss out.
- Family trust resolutions: It is now mandatory for discretionary trusts to have a written trustee resolution before 30 June showing the intended distribution of income to family members. It is so important to get these percentages and dollar amounts right or face potentially paying thousands of dollars more at tax time.
- Claim everything you are entitled to: Make sure you know what you can claim. For example, if you are on the road for work (or work outside) you can claim sunscreen, so if your foundation, lip balm or moisturiser has an SPF factor, then you may be able to claim it. You can also claim for a home office, internet, travel, training and so much more.
Saving tax is a little like trying to find the perfect pair of jeans – it requires research and a little bit of legwork, but if you’re willing to put in the effort you will have a great result. If you don’t, then you really can’t complain.
My suggestion is to prioritise this list with the things you can easily do before 30 June, and then, as a modern-day philosopher once said, just do it. Of course, if you need more help make sure you call a great accountant who should be hassling you to do your tax planning now.
Melissa Browne, founder, The Money Barre, and author of “More Money for Shoes” and “Fabulous But Broke”
