Please note that these tax tips only apply in Australia .
The new financial year presents a stressful but exciting time for small business owners. Surrounded by a mound of books to balance the final figures for last financial year, dealing with the taxman and paperwork coming out of your ears – literally. It’s a hectic time no doubt about it; and taking as much of the stress out of it as possible is crucial, especially for small businesses.
Finalising this tax year provides the perfect opportunity for a business health check ready for the new financial year. There’s no point stepping into 2017 with debt, bad spending habits, and messy expenses. Instead, use this time to identify ways to minimise future tax bills by utilising smart financial tax tips and comprehensive financial planning:
1. Get Control of Your Cash Flow, Today!
Without good control over your cash flow, your business wealth foundation is going to be very weak. Business owners should utilise the start of the new financial year to review spending habits and start a relevant and realistic budget. This will provide a better understanding on where business money is going and what further improvements can be made.
Controlling your cash flow starts by preparing and maintaining a cash flow forecast. This should be reviewed and updated accordingly every week or fortnight to offer an accurate outlook on the business’ finances for the next 6-12 months. Take advantage of the latest smartphone budgeting and cash flow management apps to help maintain your budget. These will help to ease the stress of setting things up too.
2. Use Your Instant Asset Write-Off
There’s an instant write-off for small business assets under $20,000 that can be super beneficial to your finances. Crowned one of the best tax breaks for small businesses, you can take advantage of this end-of-year deal by acquiring some vital capital assets and reducing taxable profits.
Use the $20k write off to purchase machinery or business equipment. This can include vehicles, office fit outs or furniture or technology upgrades and other essential items for the new financial year. You can pretty much claim anything with the instant asset write-off; providing its under $20k and used solely for business purposes. If you’re claiming more left-field deductions, make sure you keep a full paper trail. To qualify you must be a small business – which means your annual turnover is less than $10m (increased as of 1 July 2016).
3. Write Off Bad Debts
Bad debts don’t hold a positive place in the 2017 financial year so start getting finances under control now. You can use your accounting software to write them off in the new financial year before June 30th, but to qualify for a tax deduction on the debts, it must be a pretty bad one.
If your business debts are really starting to add up, consider implementing some basic debt reduction strategies like consolidating credit cards. Debts need to be outstanding beyond 12 months to be written off and claimed and must be supported by documented pay work to cash in on.
4. Check Your Stock and Assets
Now is the best time to complete a stock take and ensure all stock and assets are accurately recorded. Excess stock need to be documented too and be destroyed appropriately to reduce your tax liability. Use this as an opportunity to write off any equipment that’s no longer valuable or useful to your business and review the fixed asset depreciation schedule to prepare yourself for the new financial year. When it comes to business stock and assets, record keeping and compliance is vital for expense claims and lodging your tax return.
5. Protect Yourself from the Unexpected
Your greatest business asset is making sure your income is thoroughly protected. Personal and business insurances should be reviewed around this time in preparation for the new financial year. Consider policies like income protection, life and health insurance for reliable backup options and cover and make sure any necessary changes are made.
Many small businesses fail to double check their existing insurance policies are relevant for their current situations. This can result in excess costs you may not need to be forking out, or failing to be covered for the essentials should something go wrong.