It must be that time of year again. As accountants we know that it must be nearly 30 June when we hear
“I want to ensure that I pay the lowest amount of tax that I am legally required”
When starting to draft this blog, I began to detail many of the productive tax planning opportunities available to businesses and business owners for the upcoming 30 June, most of which are well publicised. Understanding that business owners are extremely time poor, I thought “what else should be considered before 30 June when we are tax planning”.
Contrary to popular belief, establishing a business structure is not a set and forget decision. In practice we often see businesses who have simply outgrown their current business structure. This occurs for a variety of reasons including:
- structures that do not allow for the introduction of new business partners
- structures that do not appropriately manage asset protection risks
- dare I say it, structures that are inefficient for tax purposes
Before 30 June is a great time to review with your advisors whether your business structure is still appropriate and to gain an understanding of the implications of restructuring. With the introduction of small business restructure rollover provisions, the tax outcome may not be as prohibitive as you think.
Business & Accounting Optimisation
As accountants we get it, there is no “good time” for a business owner to reflect on what has been achieved, what can be optimised or to plan for the periods ahead. Whilst it is easier to ignore, there is no denying from my experiences that businesses who effectively plan, implement and review achieve better results than their peers.
From an accounting perspective, prior to 30 June is a great opportunity to consider how as a business you are using your accounting systems. This includes whether you are using the best accounting product for your business or if you have the best product considering if it is being used at its full capability.
Optimising your accounting processes through automation (bank feeds) and connected applications will not only reduce the time spent on capturing data but will lead you to being able to access richer information to make more informed decisions.
Getting this right makes the business planning and budgeting process easier and allows business owners to track their progress in real time. There is no excuse for a small business owner to be still entering data in their accounting system on the kitchen table at midnight during the 30 June 2022 financial year!
Measures to put money back in your pocket
Business owners and operators work extremely hard to build a sustainable and, in most cases, a profitable business. Unfortunately, in the heat of battle simple things are ignored which can have an impact on the profitability of a business:
- We often hear people talk about refinancing their home loans, but rarely do we hear about business owners reviewing their business loans. With the reduction of interest rates over the last few years there is a risk that you may be paying interest on your business loans at an above market rate. Reviewing the businesses debt position and asking for a reduction in interest rates is a must do. The worst thing that can happen is the bank says no!
- The Government loves to give away money in the form of grants, funding, or support programs. Without knowing it your business could already be eligible. As such you should review the following link to check whether they are any suitable grants or programs available: https://business.gov.au/grants-and-programs
- Review expenses on direct debit payments. This sounds so simple, but a recent experience with a client made me gasp. The client sold 15 iPads that were no longer being used (tick) but forgot to cancel the sim cards (fail). As the payment was on a direct debit no one ever thought to check the invoice and the business continued to pay for the 15 sim cards for next 12 months.
2021 Tax tips
It wouldn’t be a 30 June blog without a few tax tips. Whilst there are many useful and productive options available for taxpayers to reduce their taxable position, it is important to note that simply spending money to obtain a tax deduction without a beneficial purpose is illogical. The spending should be aligned with business needs and the ability to generate future profits.
Here are a couple of measures which are worth consideration for this financial year.
Business owners are generally terrible at making superannuation contributions for themselves. The Government has finally recognised this and have introduced an ability to carry forward unused concessional (tax deductible) contributions for taxpayers with a total superannuation balance of less than $500,000.
For the 30 June 2021 financial year, taxpayers can carry forward unused concessional caps ($25,000) from the financial year beginning 30 June 2019.
This means someone who has not contributed to superannuation during this period can contribute and claim a tax deduction of $25,000 for the current financial year and an additional $50,000 for the 2 years prior.
Not only does this assist in reducing the taxpayers tax position, but it also assists them in building their wealth within superannuation.
Anyone considering utilising these provisions should seek professional advice as the rules regarding superannuation are complex.
Businesses are eligible to claim a 100% deduction for the cost of depreciating assets purchased after 6 October 2020. Assuming your business turnover is less than $5Billion, this provides a fantastic opportunity to be able to reinvest back into the capital equipment that will drive future profits and efficiencies.
Importantly, these provisions have now been extended and now are scheduled to finish at the end of the 30 June 2023 financial year.
Whilst 30 June provides an opportunity to think about tax planning, businesses and business owners need to think broader than this. It is important to realise that what has been discussed in this blog can be considered at any time throughout the year. Those who are continuously reviewing the items discussed keep a step ahead of their competitors and by implementing solid practices within their business end up with more time to grow their profit-making activities.
General Advice Warning
The information contained above is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice. Please do reach out to me by clicking on my profile below.