As we’ve just rolled into the new financial year, we thought it would be a good time to start talking about tax planning and in particular, tax planning for small businesses. We believe the new financial year is the best time to begin tax planning, rather than leaving it until the end of the financial year and having to make last-minute decisions to improve your tax position. So let’s talk tax and some simple things you can do in your business from now until the end of the financial year to reduce your tax bill and maximise your return!
Be Organised
Yes, this might mean throwing away that old shoebox of receipts and organising your expenses in a more orderly fashion. Nowadays we are blessed with this handy little thing called technology and there is an endless list of programs that will help you organise your finances, reducing manual handling and actually automating a lot of things that often chew up your time! There’s no perfect program for every business, so it’s best to talk to your accountant who knows your business systems. They can help you decide which program/s will best suit your business needs and automate processes that often take up a lot of your bookkeeping time.
Moving towards the use of technology means nothing is forgotten, receipts aren’t lost and you can see the real-time financial situation of your business at any given time, rather than waiting to calculate your finances at the end of the month or quarter. Knowing your financial situation in real-time will allow you to make business decisions quickly and know when is a good time to spend money or hold on to your money.
Know What You Can Claim
As a business owner, we understand it can be difficult to keep up with what you can and can’t claim, how much is too much to spend or when is the right time to spend - but remember that’s what an accountant is for! We do this work every single day and a big part of our job is keeping up to date with the changes from the ATO so we can help our clients make smart financial decisions that will pay off at the end of the financial year. Speak to your accountant in the new financial year, talk in-depth about your business and what plans you have for the future and they will be able to make suggestions on how you can get the best tax outcome for that year. Speaking with your accountant early in the year will allow you to make better decisions throughout the year - it will give you a clear understanding of what you can claim and perhaps even a budget for spending in the different areas of your business.
In basic terms, you can claim certain expenses incurred to earn your income. However, tax planning is more than just knowing what you can claim, it’s about making sure what you spend throughout the financial year will support the income you make over that same financial year. Knowing your current financial position with real-time financials from accounting programs, as we mentioned before, will make these decisions much easier.
Learn From The Past
Organising a meeting with your accountant in the new financial year will allow you to look over the previous financial year together. During this meeting, you can discuss the previous tax outcome and decide on what actions need to take place for the year ahead to reach a better tax outcome or take advantage of certain claims within the business that you have missed in the previous years. If you’re expecting big growth in your business over the next financial year it’s important to discuss this with your accountant so you can both prepare for it and make necessary adjustments to help reduce the tax liability for the increased profits.
Looking back on your past spending habits, in a yearly summary, is important to give you a better perspective of where your money is going. Now you can clearly see your business spending habits, you can find ways to cut back on spending, make sure you’re claiming all the appropriate expenses without missing out on anything and set goals for the future of your business.
Make the Call
Now is a good time to pick up the phone and call your accountant. We hope with this information we can encourage you to be at the forefront of your tax planning this year, allowing you and your business to get the best tax result possible. Organising a meeting with your accountant now will allow you to sit down together and discuss the past and future of your business, what changes are necessary moving forward and how to reach your business goals for this financial year