How Strategic Tax Planning Can Boost Your Small Business?

October 8, 2021    Accounting Services Perthwa

Tax planning for all the small businesses within Australia is highly essential. It helps reduce the amount of tax, which gets paid to the Government and will maximize the interest. The strategic tax planning will take the help of tax-law provisions like applicable breaks, allowable deductions, work on reducing the tax income and tax credits. But a business will only be considered a small one when viewed as a sole trader and the business turnover threshold, which is below $10 million. 27.5% is the corresponding tax rate of all the small businesses out there. 

Strategies Tax Planning That Will Help Small Businesses

When it comes to strategic tax planning, there are some of the ways through which it can help small businesses. To know what these strategies are, please check the information below! 


1. Deduct The Assets That Are Lower Than $20,000

There are many small businesses out that have existing depreciable assets, which comes with a written down value that falls below $20,000 during the end of the financial year. 

Small businesses are free to deduct these assets easily, which will instantly reduce the taxes. It also doesn’t matter whether investments are new or second-hand. The Small Business Accountants says that all small businesses should immediately apply the depreciable rules.

Doing so will enable them to claim the asset write-off instantly. But this will not work with all those assets that have been omitted from the rules.


2. Accede The Capital Improvements & Investment Incomes

It’s highly essential to arrange the receipts of the investment income along with the contract date of the sale for all the capital gain assets. The contract date stands out as the primary date instead of the settlement date for working out when a sale occurs. This is one of the best tax planning strategies in Australia, which helps in pushing all the tax payable towards the upcoming future income years. 


3. Fringe Benefits Tax Exempt Products/ Tools Of Trade

Under the tax planning 2021 Australia, this particular strategy will allow all the small business owners to benefit significantly after obtaining FBT or Fringe Benefits Tax products. 

It’s because they will receive a tax benefit through it. They can easily pack all the tax benefits, such as notebooks, computers, mobile phones, portable or handheld tools, digital cameras, organizers, and protective clothing. 

Other items that they can package are computer software, briefcases, and personal electronics. 


4. Maintenance And Repairs

Small business owners can quickly get it done when it comes to making payments for repairs and maintenance. But they need to do so right before the end of an income year if they wish to obtain the tax deduction of this particular income year. But individuals have to make sure that they confuse with the capital improvements, which usually gets depreciated. 


5. Donations Caps Superannuation

This is another small business strategic tax planning technique where business owners have to ensure that they don’t contribute way too much than the annual contribution cap of $25,000. Otherwise, they will become subject to an excess contribution tax of 46.5%, which is undoubtedly not a good thing. It’s highly essential to deposit the contribution within the given time and date.


6. Private Firm Loans

Business owners who have taken loans from their firms within the past years have to make sure that the interest repayments and appropriate principles are made within a given time. All the current year loans have to be paid in full. Otherwise, they can use a loan agreement entered right before the lodgement of the firm’s return. Failing to do so will make the fund an unfranked dividend under Division 7A.


7. The Lease Arrangement 

When an individual is preparing to buy a brand-new asset, entering 1 or 2 years of lease arrangements will be highly beneficial. It will help provide a massive upfront tax deduction when compared with financing the purchase by paying for the asset in cash or utilizing a chattel mortgage. 


8. Keep All The Accounts For An Effectual Business Supervision

If any type of problem or dispute occurs with the ATO, individuals must always keep all the vital records such as receipts, employee records, expense invoices, bank statements, credit card statements and asset purchasers. Other records that every business owner has to keep are vehicle records, a list of creditors and debtors, and logbooks. 


9. Work In Progress/ Year-End Stock

If applicable, small business owners have to create a detailed Work in Progress or Stock Take listing within a given time. It’s recommended that they review and double-check their listing correctly and fix all the errors or mistakes they encounter right before submitting the list. 


10. The Tax Consolidation 

When you have gotten yourself some brand-new companies, which are part of the group, you must consider consolidating all those companies for tax-related purposes right before the year-end. Through the resultant single tax entity, you will become eligible to offset all the losses and profits from various entities. 


11. Investment Property Devaluation

Small business owners who have a rental property should make proper arrangements for the property depreciation report. Doing so will allow the business owner to claim a massive amount of depreciation. Apart from that, it will also enable the business owners to build a write-off deduction for their rental property efficiently and effectively. 


12. Bring Forwards All The Expenses

Make sure to purchase all the consumable products and items computer supplies, consumables, stationery, marketing materials, and printing office supplies. The purchase should be made within a given timeframe so that business owners can obtain the deduction for the income year easily and effectively. 


Ending Words 

Tax planning is highly essential for all small businesses out there. It will save plenty of funds, lessen the overall tax, and maximize the cash flow for a particular business. But planning tax is not that easy, and for such reasons, it will be better to follow the strategies mentioned in this article. They will help small business owners plan out their taxes properly and prevent unwanted issues, errors, or mistakes during tax planning.

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