Tax time… it is once again that inevitable time of every year for business owners. Are you prepared? Do you know how to best lodge yours?
Find out what you need to know about maximizing your returns this EOFY and how to be better prepared for the next!
Tip 1 – Be prepared
When it comes to tax, being a self-employed business owner means you play by some different rules. If you’re self-employed and hire employees and contractors, then there are a few extra steps you need to be prepared for.
Firstly, you need to disclose the wages or contract amounts that you pay to other individuals. This data usually gets matched with your employee’s tax return and is used to check the accuracy of what they claim.
However, these rules don’t necessarily apply to all industries.
If you’re in the building or IT industry or have a Couriers, transport, or cleaning business, you will be required to disclose all contractors. In doing so, you’ll also need to provide an ABN and declare GST, to make sure all business owners and employees are claiming the correct amounts.
Tip 2 – Grants and Subsidies
This year has been a fruitful one for grants and subsidies, we all enjoyed the benefits! But don’t get caught out by that tax amount you might not have accounted for.
Making sure you know what is coming is always the best way to be prepared. Sometimes, things like grants and subsidies can fly under the radar, which is why this tax tip for business owners is about making sure your know what additional tax you might need to pay.
Things like ATO cash benefits, Job Keeper received up until March, and Job Seeker benefits, can all be taxed. So if this year you accessed any grants, just remember you might not have accounted for that extra tax!
Budgeting tax for those extra grants can mean the difference between being prepared and falling short on that tax bill.
This year, when you review your books, just keep in mind the importance of knowing what your tax liability will be.
Not sure what tax you should be setting aside? You are most definitely not alone. The best way to avoid the shock is to keep up to date with your profit and loss and make sure you are constantly putting enough tax away.
Tip 3 – Payment plans and penalties
Sometimes that tax bill is a little higher than we can manage in a lump sum. Sometimes the numbers don’t quite go as planned.
While penalties do apply for late payments or late claims, the ATO can actually be quite accommodating as long as you maintain open communication.
If for any reason your payment might be late or any other delays might have to occur make sure you communicate it to the ATO. Communication is key! They just want to know you’re compliant and actively working to lodge on time. In the unfortunate event that you do happen to lodge late, you can request a remittance. Just make sure it’s a one-off occasion.
Did our tax tips come in a bit too late? If you got a shock from your tax bill, there is still hope and a few things you can do. Getting a payment plan after 36 months can be the key to relieving some high-pressure tension! Nonetheless, although payment plans can be a life saver, you must still be cautious and make sure you are paying that debt off as quickly as you can.
You only have 1 year until your next round of tax lodgments, and you definitely don’t want your debt to grow!
Tax debt can really limit your choices if you’re looking for a business loan. If this is your case, speaking to our Rise High brokers can be the best step to helping you get the support you need to finally get up to date!
Tip 4 – Benefits of Superannuation
We can’t stop talking about the benefits of Superannuation, and there’s no exception here.
So how can you get those benefits? By getting your pay runs processed and superannuation paid before June 30th you can get an instant outright tax deduction! It’s really easy to calculate, so you can claim the deduction as soon as you put the money away.
Looking for even more encouraging news? They’ve extended the small business write-off, so you can still claim assets under $100,000 and write them off straight away.
Tip 5 – Start the next financial year off well!
Setting you up for the future is one of the things we love to do at Rise High. This tip is all about preparing for your future tax obligations before the new financial year!
- Set those goals and strategies
- Have clear objectives for the year
- Plan for what you want to achieve for the business (and for the future of your employees as well!)
- Take note of what the government is doing and any increases in wages that will shrink your bottom line!
All of these will help you develop a solid plan to maximize your returns next financial year, placing you well ahead of the curve.
To get you started, the increase in superannuation is an example of the types of changes you want to be aware of. A 10.2% increase in superannuation which will mean an increase in staff costs without any wage increases, is one of the changes you might want to keep in mind.
To truly get ahead and maximize your returns, we suggest you map out your budget and have a strategic chat with your accountant. Start planning now for the unavoidable, next financial year’s tax bill!
Tip 6 – Invest in technology
There are always exciting things on the horizon and this year is no different. Coming up July 1st there are a few changes that we want you to know about.
As a small business owner, the ATO wants you to lift your standards in IT. Upgrading the process for your business and individuals will mean being able to process claims with 100% deduction. Spending money to keep your business current and technologically advanced could have even more benefits yet. When you lodge your tax return, you can get an additional tax offset! Ultimately reducing your bottom line as far as your bottom line is concerned.
Tax for business owners can be a source of great returns if you really know where to look!
Since this is a great opportunity for your business, we recommend that you keep a list of what you spend on technology and your employees. When making these upgrades or investing on training, keep the expenses separate. You’ll thank yourself for keeping that information at the ready!
Tip 7 – Look at the financial perspective
Your accountant wants to save you as much money in tax as possible, but they’re not the only ones. Let’s have a look at the finance perspective!
Tax for business owners means more than minimizing your payments. It can also translate into ensuring you positively impact your borrowing capacity.
Your borrowing capacity is highly reliant on your bottom line and tax payments. When you’re planning for the start of the year, speaking to your accountant and mortgage broker can be one of your smartest moves.
Working with your mortgage broker can ensure your plan works for your future investments! Having all the information available will allow you the benefit of paying the lowest tax amounts whilst improving your borrowing capacity.
A great strategy will allow you to know when you need to spend and when you need to save! Our team is always here to ensure you make the best decisions to support your own business’ needs!
Although the future is important, there are a few more things you can do now!
If you’re invoicing or you’re on a cash basis you could still increase your savings. If your income is high and you have sufficient cash flow, you can postpone issuing those invoices. Sending them out on July 1 will mean you won’t be taxed for that additional income in this financial year (but will accrue them for the next).
Choosing to pay them ahead of time can also get you ahead financially for the next financial year, so again, planning and keeping your business objectives clear will be key to maximizing your returns.
On the other end of the scale, you can also prepay. Things like your rent and other expenses can make a significant difference when you lodge your tax return.
Making sure you review what’s going on in your business and can be confident that a lack of cash flow won’t be an issue in the next month, will ultimately determine the best way to proceed tax-wise.
Although tax time can be quite tricky for business owners, your accountant and mortgage broker can help minimize its effect on your finances.
Keen to help your employees lodge their own tax as individuals? you can access our tax return checklist here! Or get in touch with our team today for personalized advice to support the growth and goals of your business!