When it comes to minimising tax, there are a number of simple things business owners can do as well as a couple of more advanced strategies.
Remember though that tax is only ever a percentage of your earnings so never:
- – By an asset or incur an expense only to obtain a tax deduction; or
- – Defer income or bring forward costs at the expense of your business’cashflow.Simple Strategies
- – Write off bad debts in your accounting system prior to 30 June to ensure you get the tax deduction in that year.
- – Pay all employee super contributions prior to 30 June as super contributions are only deductible once paid and received by the fund.
- – Subject to cashflow, maximise owner super contributions to the allowable annual contribution caps.
- – Subject to cashflow, defer income until the following year by delaying invoicing until after 30 June.
- – Subject to cashflow, bring forward tax deductible expenses by prepaying recurring expenses such as rent and insurance premiums and purchasing non-stock items prior to 30 June.
- – If you are classed as a small business (i.e. group turnover of less than $10 million), maximise your depreciation deductions by purchasing necessary assets costing less than $20,000 and utilising the ‘small business pool’ for depreciation.Advanced StrategyIf your business makes a profit higher than the income levels your family need to live, consider the attached structure strategy map to maximise your business and personal asset protection and minimise your tax.Rules for Strategy Map
- – There are three main sections, each with its own tax rate.
- – The rate of tax paid is determined by where the money is earned ordistributed.
- – Where you distribute the money for tax purposes, the actual cash mustfollow.
- – To prevent unwanted tax problems, pay yourselves enough to live on (i.e.don’t borrow money from the business).
- – Any surplus profits can be retained in the “Corporate Section” at reduced tax rates (e.g. up to 19.5% less tax).
- – Move surplus funds away from the trading entity and utilise formal loan agreements and PPSR registration to protect wealth from risk of loss.
- – Invest in Trusts and not Companies to minimise future Capital Gains Tax.Tax minimisation and business structuring should be done together and is a specialist area. We are happy to chat with you at any time to help you with this or any other areas of your business.