With 2021 speeding ahead, tax time will be upon us sooner than we think. Whether you’re just starting out, or have been running a business for years, it’s important to know details about your taxation requirements.
We’ve compiled a list of 5 essentials tips to help your lodgment go as smoothly as possible.
- Keeping Records
Keeping the correct records is one of the ‘Golden Rules’ when it comes to tax tips. A misplaced receipt or an incorrectly filed invoice could see valuable deductions disappear, so efficient record-keeping is crucial.
Under Australian taxation law, you are required to keep business-related records for five years. The types of things you should keep a record of are:
- Sales receipts
- Invoices for expenses
- Credit card and bank statements
- Employee records (such as wages, superannuation payments, tax declarations and all contracts)
- Motor vehicle records
- Debtors and creditors lists
- Any purchasing of assets
- Loan documents
- Utilise Technology
If you are hesitant to adopt technology, take this year as a sign to do so. Technology can allow you to automate certain processes to reduce the heavy lifting when it comes to preparing for tax time, such as tracking payroll, managing expenses, and creating reports.
You may also be able to link bank accounts and credit cards to enable detailed reports without the need for time-consuming data entry.
- Investigate the ‘loss carry back’ tax scheme
The government has reintroduced the loss carry-back tax scheme, meaning if your business has experienced a net operating loss, you may be able to apply that to the previous year’s tax return.
This can result in a refund of taxes previously paid, by reducing the tax liability for that previous year. But keep in mind, it is not available to everyone. You must operate through a company, so trusts, partnerships and sole traders are ineligible.
- Leverage the Temporary Full Expensing
Temporary full expensing is a generous tax break for small and medium-sized businesses and applies to those with an annual turnover of up to $5 billion.
It allows businesses to immediately write off the full value of all new assets, with no limits on individual purchases.
Any depreciable asset first used or installed before June 30th, 2023 will be eligible for the scheme, with businesses able to claim the full deduction for its cost. Businesses will also be eligible to claim full deductions for the cost of improvements they make to any existing depreciable assets.
This is the perfect opportunity to upgrade equipment and machinery in a tax-savvy way.
It might be worth considering reviewing your financing arrangements to allow you to take advantage of this write-off, whilst also intelligently restructuring your debt to maximise your business profitability. To determine whether the ability to leverage this advantage applies to your business, reach out to the team at Morris Finance.
- Write-off bad debts
Unfortunately, debts are a part of business. And whilst we all hope that our debtors pay in a timely manner, this isn’t always the case.
It may be helpful to sit down with your accountant around tax time and discuss your list of outstanding debtors and consider whether you think they will pay their invoices. If this looks unlikely, you may consider writing them off as a bad debt before the end of the financial year and claiming the tax deduction. Be sure to keep a solid paper trail when doing this.
These tax tips may give your business a financial advantage come the end of the financial year. If your business is looking for other opportunities to maximise their profitability, whether it’s through equipment financing, capital raising or restructuring your current loans, Morris Finance can help.
Simply call 1300 4 MORRIS and speak to one of our finance specialists to see what we can do for you.