Now that it’s that pointy end of the financial year where we all start thinking about taxes, it’s time to look at some strategies that could help reduce your tax liability. But before you start pulling out piles of receipts from the shoebox (we know you’ve got it hidden under the bed), think about what you’ve already got in place that will make for smoother sailing as you close out the financial year.
For small business owners, remember that different tax rules apply to you if you’re considered a small business under the Tax Act. Your turnover, including connected entities and affiliates, has to be under $2 million (excluding GST) per annum to qualify under this definition.
Instantly write-off new assets that cost less than $20,000
The 2015 Federal Budget announced that small businesses with an aggregate annual turnover of under $2 million can claim immediate tax deductions for all asset purchases costing less than $20,000 made until June 30th 2017, rather than having to depreciate those purchases over several years. Previously, the instant asset write-off threshold was $1,000. Get more information about if this applies to you in our Town Square article. The immediate tax deduction threshold is only applicable for qualifying assets that were purchased from 7.30pm on 12 May 2015, and are ordered, installed or ready for use by 30 June 2017.
Company tax rates are on the way down–they currently sit at 30 percent. In the new financial year the government is set to cut that rate to 28.5 percent for companies with turnover less than $2 million. If you’re looking to spend money on your business, the current financial year is the time to do it so your business can get the full deduction for asset purchases under $20,000. If you’re a small business, you’ll also reduce your company tax this year when you are paying 30 percent.
Defer your income
With the small business tax rate dropping to 28.5 percent next year, deferring some income until after June 30 means that any dollar you’re paid in next financial year you’ll pay less tax on. This is particularly beneficial for services businesses who are planning to issue invoices in the coming days. You’ll also give yourself another 12 months of grace before you need to pay tax on this income.
Keep up-to-date with the Australian Government’s tax changes that apply from July 1
In the most recent Federal Budget, the government announced a range of measures and changes as part of the Small Business and Jobs Package that affects small business owners. Now’s a good time to read more about the Small Business and Jobs Package and find out what changes apply to you in the upcoming financial year.
Get yourself set up for the new financial year
Using Square’s integration with Xero to help get the books ready for year end? If not, it’s time to connect the dots. Square Point of Sale integrates seamlessly with Xero to ensure your sales data is uploaded automatically to your accounting software, which will save you hours of work. Combine this with the tools in your Dashboard, and you’ll get a full picture of your sales performance over the past financial year. Doesn’t that make life easier!
To fully prepare your business for the end of financial year, schedule time to speak with your Accountant or Financial Advisor. This article is for educational purposes, and Square does not accept responsibility for the accuracy of the information presented in this article.