Tips To Maximise Your Small Business Tax Return

As the end of the fiscal year draws closer, you have probably started to think about filing the tax return for your small business. It is in your best interest to get started on your tax planning as soon as possible, even though you still have some time until you have to turn in your return.

You will be able to implement tax-efficient tactics with the help of these pointers, allowing you to keep more of the money you earn in your own pocket.

How do most Australians do their tax return?

According to the Australian Taxation Office (ATO), the vast majority of taxpayers opt to have their tax return prepared by a tax agent such as Hillyer Riches. A tax agent's assistance is required for the filing of seventy percent of all tax returns.

Despite the fact that ATO marketing and the media have been telling us for years that we should do it ourselves using ATO MyGov and myTax, this has remained virtually entirely unchanged.

Why doesn't everyone handle their own taxes like they used to? Because the majority of individuals prefer to obtain tax assistance from a person who is on their side.

Tax planning tips

We won't have much longer to wait before the end of the tax year as June 30 is just around the horizon. Both your projected or expected taxable income for the upcoming fiscal year 2020-21 as well as your expected taxable income for the current fiscal year 2019–20 (which is essentially your business's assessable income, minus any allowable deductions) should be taken into account right away because they will be crucial in determining how you should approach your tax planning strategy.

A helpful hint is to determine your income band and the amount of tax you are expected to owe by consulting the tax rates for single traders or company tax rates published by the Australian Taxation Office.

In the event that you anticipate having a bigger income within the present fiscal year in comparison to your predictions or expectations for the subsequent fiscal year, you ought to give some thought to having a talk with your accountant about the following scenarios:

• You are preparing for some of the costs that you will incur in the 2020-21 fiscal year by prepaying them in the 2019-20 fiscal year. These costs may include your rent, insurance, or subscriptions to professional groups. The current tax year allows taxpayers to deduct the expenses of up to 12 months worth of the next year.
• Take advantage of the instant asset write-off, which enables you to immediately deduct the cost of any assets that you buy for your company and that cost less than the threshold that applies to that acquisition (whether the asset is purchased new or second-hand). The criteria have changed over the course of the past few years and will decrease to $1,000 beginning on July 1, 2020; thus, see the ATO website for complete details since they have been moved around.
• Performing an audit of your creditors and erasing any debts that cannot be collected.
• Taking into consideration and subtracting, if necessary, any start-up costs, such as hiring an attorney or a small business accountant to advise you on the best business structure for your company and paying fees associated with establishing that structure (e.g. ASIC company registration fee).

If you believe that you will have a larger income for the following fiscal year (2020-21), you should discuss the following options with your accountant:

• Bringing forwards any outstanding invoices into the current fiscal year for scheduled work that is expected to be completed in the following fiscal year, if doing so is deemed reasonable and feasible to do so.
• Paying your bills when they come due rather than making any payments towards them in advance during the current tax year is considered to be timely payment.
• Purchasing any necessary assets or pieces of equipment for the firm during this year. If you go ahead and make the decision to buy assets for your company, you should do so with the requirements of your company in mind. For instance, if you want to grow your business operations in order to accomplish your business goals or because it is in accordance with your business plan, you might need to buy a truck just for making deliveries.

Tip: Steer clear of making purchases for the sake of claiming tax deductions for such purchases. In most circumstances, you'll end up paying $1 to save $0.30* in tax (*based on the most prevalent corporate tax rate).

Do I need an accountant to do my tax return?

You have the option of preparing your own tax return, which you can do yourself, or you may hire a professional to do it for you, depending on how complicated your financial situation is.

It may be beneficial for you to hire an accountant (who will need to be a registered tax agent1) to prepare and file your tax return if you have a number of different sources of income, a number of different investments, and possibly even your own business, or if you have a large number of deductible work-related expenses.

If, on the other hand, the only income you receive is from your employer, you don't have many deductions to claim, and you don't have investments that are making money for you, you might decide to file your tax return online by yourself using my Tax, which can be accessed through the myGov website of the Australian government. If this describes your situation, you might choose to do so.

If you are undecided about which path to take, the following advice and suggestions may be of assistance to you as you make your choice.

Lodging Your Tax Return Yourself

If your personal finances are not very complicated, you may want to try filing your tax return on your own (which you are required to do by October 31 for the preceding fiscal year) in order to save money on the fees that you would otherwise pay to a registered tax agent.

According to the Australian Taxation Office (ATO), one of the advantages of submitting your tax return electronically through the myTax system is that it is safe, secure, and the majority of the information required from your employer, bank, and other government agencies will be pre-filled for you by the middle of the second week of August.

In the meanwhile, if you have assets, rental properties, capital gains, or if you are a sole proprietor, you can still utilise myTax even if your position is a little more complicated than the average taxpayer's.

In addition to this, the service is offered 24 hours a day, seven days a week, which means that you can file your return at any time, and you will typically receive your refund within two weeks, which is potentially a faster turnaround time than using another method.

Engaging a Registered Tax Agent

It is crucial to keep in mind that you will be required to pay a fee for the service of a registered tax agent in the event that you decide to employ their assistance in preparing and submitting your tax return; however, in most cases, this fee will be deductible in the subsequent tax year.

It is important to note that tax agents are required to be registered with the Tax Practitioners Board (TPB), and the website of the TPB can be used to locate a registered tax agent or determine whether or not a person is registered.

If your financial situation is more complicated, taking this route may help you feel more at ease because it will likely save you time, bring to your attention deductible work-related expenses that you were previously unaware of, and ensure that all of your claims are founded in reality.

On top of that, the vast majority of licenced tax agents have access to a unique programme that allows them to lodge returns for their clients after the normal October 31 cutoff date. This allows them to maximise their clients' refunds. You will, however, be required to get in touch with them in advance in order to confirm if the aforementioned opportunity is one that you can pursue if you so desire.

What can Real Estate Agents Claim For?

Working as a real estate agent requires long hours, a significant amount of travel, and the ability to deal with clients and sellers who are unable or unable to make quick decisions. When things are going well, it's a wonderful job choice, but when things aren't going well, it can be the most irritating career choice ever - sometimes all in the same week. The following is a list of our most important tax advice for real estate brokers.

Your Car

You probably use your vehicle more frequently than the average person because you work in real estate. Your vehicle will experience wear and tear as a result of travelling to and from open houses, interacting with potential buyers and sellers, and fulfilling various other obligations. You might want to think about whether maintaining a logbook or a percentage agreement would be more helpful to you in the long run. Talk to your tax preparer about the options that will benefit you the most.

Communications

All of your electronic devices, including your mobile phone, laptop, and tablet, are utilised in marketing and communication. These are essential tools for the job, but aside from those, what other methods do you employ to keep in touch with your clients, as well as the office and other employees? If you are a real estate agent, you are expected to be reachable at all hours of the day and night. Although this can be a huge detriment in day-to-day living, it also has the potential to be an effective tax weapon.

Equipment

The tools that are utilised by real estate brokers have seen significant development over the course of the past decade. Only a few short years ago, technology such as drones and camera equipment, enhanced photographic gear, and a lot of other innovations would have been impossible. Now, however, they are commonplace. This is vital not only when it comes time to file your taxes, but also when you are considering making a purchase of new equipment that could assist simplify your work. When making a purchase, it is important to examine the potential tax repercussions, as you may want to think about buying things earlier in the year if there are any potential tax savings.

Uniform

If you wear a uniform that bears a company logo, then the cost of such a uniform is almost certainly tax-deductible. You can also submit a claim for washing and laundering expenses, which may include the cost of using both your own washing machine and a professional laundry service.

Home Office

Even if you have a physical office that you travel to every day, it is highly likely that you have a designated area in your house where you may field calls from customers, react to emails, and schedule meetings. It is possible to deduct a portion of your mortgage or rent from your taxable income, which could result in significant savings in the long run.

Marketing

Whether you are self-employed or an employee of an agency will determine whether you need your own marketing equipment or not. If you are self-employed, certain expenses, such as those associated with signs and online marketing, may be deductible from your income. If you work for an agency, then there is a greater likelihood that these expenditures were immediately absorbed by your company, and as a result, there is no benefit for you to take advantage of. On the other hand, if you went out of your way to purchase brochures or stationery on your own, you have every right to submit a claim for reimbursement.

Six tips to maximise your small business tax return

Take advantage of the instant asset write-off

For enterprises with an aggregated turnover of less than $500 million, the threshold for the instant asset write-off will increase to $150,000 on March 12, 2020 and remain at that level until June 30, 2020. Previously, the threshold was set at $30,000. This implies that you can purchase an asset of up to $150,000 until June 30 and claim a deduction on your tax return for the entire amount, rather than having to partially write off the asset based on the rate at which it depreciates.

The small business tax write-off threshold will return to $1,000 on July 1, 2020, and will only be available to companies whose annual aggregated revenue is less than $10 million. This change will take effect.

Prepay your 2020-21 expenses.

If you anticipate having a higher income in the 2019–20 fiscal year compared to the 2020–21 fiscal year, you might want to think about prepaying some of your expenses, such as insurance premiums, membership dues, or subscription fees, during the current fiscal year.

During the current tax year, you are allowed to deduct up to 12 months' worth of expenses from the coming year.

Make voluntary super contributions.

Contributions made to a retirement savings plan that are deducted from a worker's paycheck before taxes are subject to a 15 percent levy. This is a decrease from the lowest income tax rate, which is 19 percent, as well as the corporate tax rate, which is 27.5 percent, and you can claim a deduction for contributions.

The maximum amount that an individual can contribute to their concessional superannuation account is $25,000. Let's say you're thinking of trying to get a tax break for the concessional donations you've made. If this is the case, you will be required to submit a form to your super fund that is labelled "Notice of intent to claim or vary a deduction for personal super contributions."

Defer income

You might be able to lower the amount of income that is subject to taxation for the 2019-20 fiscal year by deferring some of the money that you earn. This will depend on the specifics of your position.

For instance, if you delay sending an invoice until July 1, 2020, the amount of the invoice will be counted towards your taxable income for the following fiscal year rather than for this year. This is because the next financial year begins on July 1.

Review your debtors.

Regardless of the year in which you invoiced unrecoverable debts, you are eligible to claim a tax deduction on those debts so long as you can demonstrate that the debt was initially included as income and has been written off by the end of the fiscal year (June 30).

Maintain records of your decision to cancel the debt, as this can serve as evidence that the debt was cancelled before the end of the fiscal year (EOFY).

Write off damaged or obsolete stock.

If your company owns stock, you should assess your stock value and consider writing off any stock that is either damaged or no longer relevant to your firm.

Carry out a stocktake while keeping in mind that the worth of the stock can be determined either by its cost price or its nett realisable value (the price at which it is anticipated to be sold), whichever is lower.

Additional tax advice for owners of small businesses:

The following is a list of other tax planning methods that you and your accountant should discuss.

Cash accounting for GST

This means that you should account for GST using a cash basis rather than an accruals approach. As a result, you should pay GST to the ATO when you collect it rather than when you issue your invoice. Cash accounting for GST is also beneficial to enhancing your company's cash flow.

Small businesses rollover after restructuring

This method of tax planning comes in handy in circumstances in which you might be considering switching from a family partnership to a family trust in the near future. Imagine that you are a local, family-owned, small business (SBE). If so, you are allowed to transfer an active asset (like goodwill) of your firm to another SBE as part of a legitimate business reorganisation, provided that the ownership of the asset is not changed in any manner. This suggests that there won't be any capital gains tax owed. The state transfer tax might, nonetheless, continue to be applicable.

Instant asset write-off vs depreciation

You could qualify for the government's quick asset write-off, which is available to businesses with annual revenue of less than $500 million. In order to do so, you will need to meet certain criteria.

• However, as part of your tax planning, you should evaluate the advantages and disadvantages of depreciation versus an immediate write-off of the asset's value.

In a nutshell, when firms expand and produce more money, it may be to their advantage to forego the use of the instant asset write-off because doing so may cause them to miss out on ongoing deductions and depreciation.

Information that is helpful to small businesses on Simpler depreciation may be found on the ATO website.

Is your return accurate and up to date?

Another crucial component of successful tax preparation is keeping one's information current while also ensuring that it is correct. This component can help you get the most out of your deduction and give you and your accountant the information you need to make informed decisions about your taxes. The following are some of them:

• Ensuring that the logbooks associated with your company vehicle are up to date. If the logbook you are currently using is more than five years old or if the way you use your car has changed dramatically, you will need to start a new logbook. You may also give some thought to purchasing one of the several digital apps that are already available for keeping track of your miles.
• If your company maintains any kind of inventory, you have until the 30th of June in 2019 to finish your stocktake and submit it. Take note that if the difference between your estimated closing stock and your estimated opening stock is less than $5,000, you do not need to carry out a stocktake because you are excused from doing so.
• It is required to take into account any private usage of business assets, such as automobiles, in order to claim the goods and services tax (GST) on incurred costs. Take into consideration the following possibility: Despite the fact that you only utilised the vehicle for personal reasons 20% of the time, you are claiming the entire amount of GST that is applicable to the costs associated with your motor vehicle. If this is the case, you will need to submit the necessary adjustments to your annual GST private apportionment claim in order to account for this personal use. In other words, you will need to take into consideration this personal use.

Been impacted by COVID-19?

If the situation caused by COVID-19 has had a negative impact on your company, the ATO may be able to offer assistance by the following means:

• The provision of additional time for you to pay your tax payment or submit tax paperwork such as activity statements
• Providing qualifying firms with cash flow enhancements ranging from $20,000 to $100,000 that are exempt from taxation
• Creating a payment plan for your taxes that is tailored to your specific situation and includes an interest-free time
• Cancellation of any fines or interest that have been imposed during the time that your company has been harmed.

You can use the deductions function in the ATO app to keep a record of your deductions during the financial year, and then upload this record when it comes time to lodge your tax return. This is possible regardless of whether you intend to lodge your tax return on your own or hire a professional.

Check out the tax time checklist that the ATO has provided to ensure that you have all of the pertinent information you require before to submitting your tax return.