Get Your Small Business Ready for Tax Time

Having up-to-date records is the most important component of any tax preparation.

Apart from the obvious, such as purchase receipts and sales invoices, paperwork is something too often overlooked until your lodgement is due.

Now is the time to get everything in order.

Double check that you’ve recorded your logs for car and home office usage.

Do you have your business travel itineraries with any personal components recorded? Are your books reconciled and GST properly categorised?

Depreciate your assets

While your going through your records, have a look through your purchases for new additions to your asset pool.

Depending on your business turnover, don’t forget the special case for assets costing less than $20,000 or if your total asset pool is less than $20,000.

These can be written off completely, even second-hand purchases. In this instance, it may be worth considering bringing forward any asset purchases you were planning to make early in the next financial year to gain access to the deduction sooner.

But don’t go running off making purchases just to take advantage of this.

Remember that it’s a deduction, so you’re only receiving the amount you have spent multiplied by your marginal tax rate.

For example if you spend $1000, and you pay on average 30 per cent tax, then your refund will be $300, not $1000.

Capital Gains Tax (CGT) Concessions

If you have just sold or are considering selling your business, capital gains tax is important to consider.

As a small business, there are currently four different CGT concessions that you may be eligible for, depending on number of years that you’ve owned the business, the structure of your business, turnover of the business and your personal wealth.

Each exemption has its own benefits and has the potential to reduce or wipe out the capital gain all together.

The retirement exemption may allow you to contribute to your super fund
without affecting your contributions limits and the rollover concession allows you to defer CGT on replacing or upgrading an asset.

This is a tricky area so ensure you are getting advice as soon as possible.

Finance applications

One commonly overlooked problem with tax time is your ability to get business finance.

Often, when applying for business funding, you’ll be asked to show your most recent financial year’s tax return. Come July 1, your 2016-17 return will no longer be current, meaning that you may have to wait until your 2017-18 return is completed before you can begin the application process.

So, if you’re looking to source funding sooner rather than later, now is the time to get things in order.

Deductions

We couldn’t have finished this article without at least touching on deductions. There are many things that a small business can claim against their taxable income.

Here’s a quick, but not exhaustive, list of less common deductions:

• Advertising and sponsorship (but not entertainment)
• Bad debts
• Borrowed money – including registration fees and any commissions paid.
• Business travel
• Car expense
• Insurance
• Repairs, replacement and maintenance
• Tax management costs

One thing not mentioned above is home office deductions. These can be tricky, and a whole topic in and of itself.

For now, just be wary and ideally seek professional advice on what you
claim and how this may affect future CGT on your home.

Now is the time to begin preparing for your tax return.

Whether you use an accountant or do it yourself, taking the time to go through the above steps will ensure you get the most out of the end of the financial year and start the next one off on the best possible footing.