For those of us (most of us) yet to complete our returns, now is the perfect time to consolidate all your financial records, prepare and submit your tax returns, and plan ahead for the new financial year.
By doing these important tasks early, you’ll be able to measure the performance of your business, identify key areas to lower your tax liability, and meet all the relevant Australian Tax Office (ATO) legislation.
To get the most out of your tax return this year, go through this handy tax deduction checklist and discover where you can maximise your savings.
It is your legal responsibility to contribute at least 9.5% of an employee’s wage into their nominated super fund if they are paid $450 or more before tax per calendar month. This payment is known as the super guarantee (SG) and you must pay the SG at least four times a year by the quarterly due dates.
All before-tax super contributions (concessional) you make on behalf of your employees are 100% tax deductible. You may also be able claim a deduction on super contributions you make within four months after a person is no longer your employee.
If you’re self-employed then any concessional contributions, you make on your own behalf are taxed at 15%.
If your business buys or sells stock, you may need to do a stocktake if:
- Your business turnover is $10 million or more.
- Your business turnover is less than $10 million but the difference between your stock level at the beginning and end of the year is more than $5,000 (there are ways to reasonably estimate this).
By doing this, you can determine the current value of your stock, compare the results to the inventory count on your company computer system, and remove all obsolete or damaged stock from the system – so you avoid paying tax on inventory you don’t have anymore.
Make sure you finalise your stocktake as close as possible to the EOFY. This will ensure that the information you give the ATO is up-to-date when you submit your tax return.
If you can prove that your business insurance is connected to your ability to earn an assessable income, you can generally claim a tax-deduction on the insurance premiums you pay.
This tax deduction applies to any insurance you take out to protect your business, including Workers Compensation, Public Liability, Professional Indemnity, Fire Damage and Theft, Loss of Profits, and Commercial Motor Vehicle Insurance.
Defer income tax
While it’s a good idea to claim deductions as soon as possible, there are good reasons to defer your taxable income to the next financial year and beyond.
For starters, if you manage to sell an asset at a profit, instead of having to pay all the CGT (Capital Gains Tax) in one financial year, you can spread out the capital gain over several financial years to reduce the amount of tax you pay. You can even choose to defer the sale until just after 30 June to defer paying any CGT at all until the next financial year.
Just make sure you have the accounting skills and resources to accurately report portions of the capital gain over a longer time period. Alternatively, you can hire a registered business accountant to do this for you.
Other Work-Related Expenses
Whatever kind of small business you run, you may be eligible to claim a number of miscellaneous tax deductions which relate to home office expenses, travel, motor vehicle maintenance, and more.
Below is a handy list to help you identify any tax deductions you may not be fully aware of:
- Union fees
- Subscription to work-related associations
- Self-education fees – i.e. seminars and conferences, onsite training, textbooks, resources.
- Office stationary and equipment – i.e. calculators, trade tools, computers, printers, and general stationary.
- Software subscriptions
- Protective clothing and footwear – keep in mind that any clothing you can wear as normal clothing is not tax deductible
If you need assistance with filling out your company or individual tax return, speak to a Registered Business Accountant. They can assess your current financial circumstances, help you complete the necessary financial documents, and ensure that you comply with the latest ATO legislation.
Best of all? By leaving the paperwork to the experts you have more time to focus on your business.