Tax planning isn’t just about meeting lodging payments and deadlines. It’s about monitoring your cash flow, understanding your financial positioning, and adopting accounting practices that propel your business towards success.
Stay with us as we list seven valuable tips supporting planning efforts.
- Know Your Business Structure
Understand your business structure, so you use the correct rates and liabilities. Here’s a simple outline:
- Sole trader: You are responsible for filing personal and business income tax and, if you earn $75,000 or more, goods and service tax.
- Registered company: Business owners must pay income, PAYE, GST, and payroll taxes in addition to employee superannuation.
- Trust: Shareholders and beneficiaries must pay tax at an individual rate for the income they earn on the trust.
- Partnerships: Partners lodge returns on their individual net income.
- Account for Super Contributions
Businesses must pay 11% of employees’ ordinary time earnings (OTE) into their superannuation fund at least once per quarter. From 2025, the rate is expected to increase to 12%.
As a business owner, you’ll face a super guarantee charge (SGC) for missing deadlines or submitting insufficient funds, costing the business more than the standard rate. Account for these payments early to make more accurate decisions that align with your financial position.
- Monitor Business Accounts
Reconcile accounts payable and receivable to depict ongoing trends. Use this data to forecast income and expenses and identify potential gaps. Next, strategise ways to close gaps so you always have a steady cash flow.
One way to do this involves adjusting the period clients pay invoices to regulate the business’ income. Next, time large expenses for when you expect income to arrive in your account.
Accounting software, like Xero, helps you monitor your business’s activity and converts the dates and numbers into a more visually appealing format.
- Identify Eligible Tax Deductions
Accounting for tax deductions as early as possible encourages long-lasting bookkeeping practices that retain receipts and update logbooks in real-time. This will save you considerable time and resources retracing steps when auditing or lodging your tax bill.
At the start of the year, evaluate your work schedule, travel necessities, and growth plans. You could be entitled to the following initiatives:
- Fixed-rate method for individuals who work from home
- Travel and vehicle deductions
- Instant asset write-off
- Depreciation
- Educational and training expenses
- Small business energy-efficient equipment investment 20% deduction
- Find Concessions, Exemptions, and Offsets
Find relevant concessions and offsets to make significant business changes, like moving into a new property or making large investments, more financially manageable.
For instance, small businesses can receive a 15-year capital gains tax (CGT) exemption, 50% reduction, or rollover to support the move between properties. As a business owner, you can re-invest saved capital gains into other business ventures, like buying new equipment, marketing, or recruitment.
- Consider Prospective Fringe Benefits
Although the fringe benefits year runs from April to March, accounting for fringe benefits tax allows you to allocate additional benefits or reflect on more cost-effective ways to give employees what they need.
For instance, on-site entertainment can be a great alternative to off-site events requiring travel, infringing on FBT. Forecasting your FBT commitments gives you a clearer budget when building a team.
- Outsource Chartered Accountancy Support
Start the fiscal year right with Advisory One’s abundant team of chartered accountants and certified bookkeepers. Lean on us to elevate your tax planning strategies to meet both financial and growth objectives. Contact us today!
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