As the calendar flips around to 30 June, time is running out for Australian retailers to prepare for the end of financial year, which can mean added pressure and stress – but this does not need to be the case. Here are some top tips from Sam Allert (Reckon Managing Director ANZ) for small businesses to maximise tax deductions:
1. Take advantage of tax deductable expenses
If you’re a Small Business Entity (SBE) with an aggregated turnover of up to $10 million, and thinking of purchasing a piece of equipment before 30 June 2018, keep in mind you can immediately deduct the cost of eligible assets up to $20,000. Be sure to finalise your purchase soon if choosing to take advantage of the write-off this financial year.
SBEs should also be aware they are entitled to bring forward deductions on expenses for the next financial year, known as prepaid expenses. This is available where those services will be provided within 12 months of the date of expenditure. Deductable expenses would normally include items such as – office supplies, stationery, insurance and rent.
Certain types of expenditure are excluded from prepayment rules, including amounts of less than $1,000 and payments of salary and wages. It’s worth evaluating your business profits and seeing if taking a deduction in advance is beneficial.
2. Review debtors and write off bad debts and review debtors
Like many small businesses, you may have accrued bad debt in the past as the result of unpaid invoices. One option to address bad debt is to write it off, this may provide your business with a tax deductable expense.
The amount owing must be 12 months overdue to be classified as bad debt and the debt must be written off during the year. However, make sure you try all options for collecting your Accounts Receivable balance before deciding to write off bad debt as it will impact your profit.
3. Give a little
Charity contributions can be tax deductable, so now is the ideal time for small businesses to think about making a difference to a worthy cause. Check your donation is for an organisation with a deductible gift recipient (DGR) endorsement on the ABN Lookup, and you are able to declare anything above $2. Keep track of your donations and you might find you have not only helped someone else but also helped reduce your tax as well.
4. Keep detailed records
Have a system place to keep track of receipts, invoices and even a decrease in the value of your inventory found during a stocktake. Remember, the ATO requires businesses to keep records for at least five years. If you’re using online accounting software, record keeping is easy as it backs up to the cloud. This will protect your business from losing valuable information through a computer failure or misplaced papers.