Small business tax and accounting can be a complicated thing to get right.
It’s vital you, as a small business owner, have a solid tax plan when approaching your small business tax and finances from the very beginning.
Developing an understanding of the basics of small business tax deductions available, and relevant tax laws, will ensure you are ready for anything.
Here are 4 secrets to small business tax efficiency you should know, from the professionals at TaxReturn.com.au.
1: Learn Your Small Business Tax Methods
Small business tax rates and tax concessions vary, so it is important to understand your financial standing early on.
There are three basic methods to know when planning your tax as a small business for the upcoming income year.
Method 1) Use your previous turnover/s
If you’ve been in business already, you are classed as a small business for the upcoming year if your previous year’s turnover was less than $10 million.
However, if you’re completing a return for the 2015-16 financial years or earlier, that turnover must be less than $2 million.
Method 2) Estimate your current turnover
Only use this method if your turnover was less than $10 million for one of the last two income years.
You must work out whether your turnover for the year is more likely than not to be less than $10 million, based on the conditions you know about at the start of the income year. If you are starting a business, it’s best to base your estimated turnover on the conditions you know about at the time you start your business.
Factors to consider when estimating your turnover include:
- turnover in previous income years;
- plans to reduce or increase staff in the current income year;
- whether your business operating hours will increase or decrease;
- if previous extraordinary sales or product lines will be available in the current income year;
- whether your business will face increased competition in the current income year; and
- whether your business activity will increase or decrease because of changing conditions.
Method 3) Use your actual turnover
If you use your actual turnover, you cannot use the goods and services tax (GST) and pay as you go (PAYG) instalments concessions for that income year. You must choose these concessions earlier in the income year.
2: Record Your Small Business Assets
For now, the $20,000 instant asset write-off threshold has been extended to 30 June 2018. This means that small businesses can immediately deduct the business cost of each asset purchased:
- At a cost of less than $20,000 (per asset, new or secondhand);
- Between 1 July 2016 to 30 June 2018; and
- By a small business with turnover less than $10 million.
Remember to claim the deduction through your tax return in the year the asset was first used or installed for use.
For all other or more expensive assets, remember to keep good records of your purchases for depreciation calculation.
3: Know Your Small Business Tax Concessions
The most common general tax concession available to Australian small business entities primarily regard the lower company tax rate and the simplified depreciation rules.
It’s best to discuss concessions particular to your circumstances with a tax accountant.
4: Engage a Small Business Tax Professional
The biggest secret to maximizing your small business tax returns is a savvy tax professional. The team at TaxReturn.com.au are all experienced, registered tax accountants, ready to make your small business tax easy. We can assist you to set up a tax plan, ensure you are claiming relevant small business tax deductions, and lodge taxation requirements. We are open all year, so you don’t have to wait to make sure you’re not missing out.
Make your business boom today!