New Year Tax Planning for Business Owners

After going through a flat year in investment and spending interrupted by various government activities, then it is only right for a business person to congratulate himself at the end of such a year. The 2013/14 financial year was a unique year in the history of Australia, but the assuaging impacts of the lower unemployment rate, lower inflation rate, and steady interest rates make the year a lot livable.

Before venturing into the next year, it is right for a business owner to take account and also plan. New planning strategies should be introduced, and the business owner should focus on how to reduce both personal and business tax liabilities of the coming year.

Some tax strategies are outlined that every business owner should consider for financial improvement. The terms discussed may be general, but you can always tailor them to suit your business, personal circumstances, superannuation, and investments.  If you do not know how to do this, just link up with professionals, and they can help out without any problem.

Deduction acceleration

Your tax in the new financial year can be reduced if you bring forward your deductions.  They may include:

  • Payment of membership subscriptions in your professional or trade bodies
  • Ensuring payment of super contribution
  • Repair and maintenance
  • Writing off bad debts
  • Prepayment of interest on deductible loan

Deferment of income

This is a very effective strategy to plan your tax; though, it is subject to your cash flow. It becomes even more important if you are expecting your income to be lower for the coming year. If your business makes use of the cash-accounting system, then you may not be able to derive your income until such is credited or received on behalf of the taxpayer.

Claim deduction for any expense that was not paid at the end of the year

Non-Small Business Entities (SBE) and Small Business Entities gave the right to deduction for some expenses yet to be paid at year-end. They include:

  • Salary and Wages
  • Directors Fees
  • Staff Commissions and Bonuses

Reversal of increased capital allowance concessions for small business

The Minerals Resource Rent Tax (MRRT) has been repealed by legislation passed by the House of Representatives; the bill was later rejected by the Senate.  The bill was reintroduced after the senate resumed. It was to affect small businesses that were using capital allowance concessions. Any assets valued between $1,000 and $6,500 is not subjected to immediate deduction anymore.

Writing off bad debts

It was possible to claim a deduction on bad debts in a situation where the tax payer can account for income on any non-cash basis, which had previously been included in the assessable income amount. It is essential for the business to give evidence that it has made a meaningful attempt towards recovering the debt, as this is essential to prove that such a debt is bad.

Stock on hand

Carry out a detailed stock taking physically and identify obsolete stock to enable you to scrap any stock that should be scrapped. The points below can be used in valuing your stocks:

  • Replacement cost
  • Market selling value
  • Sales value
  • Cost

Capital gain

You can determine a Capital Gain at the moment you enter into a contract, rather than the date of settlement.  The signing of the contract can be delayed till the New Year if you want to sell a property or share. You can defer tax on gain after realizing a capital gain, which can be useful in accessing the 50% general discount requiring such an asset to be held for a minimum of 12 months.

Other important considerations are highlighted below

  • Superannuation guarantee
  • Concessional contributions cap
  • Non-concessional contribution cap
  • Market valuations of SMSF Assets
  • Discretionary family trusts
  • Private company loans (loans to shareholders- Division 7A)
  • Unpaid present entitlements (UPEs)
  • Review the previous year’s trading profit along with owners wages
  • Identify owner salaries, estimated tax position and superannuation contributions

Tax planning strategies

You can always enjoy various opportunities via which you can reduce tax liabilities despite the unstable and complex nature of tax laws.  You can easily implement a very effective tax strategy provided you have the right advice and knowledge. Why not link up with professional today to help out in this regard?