As the end of another tax year approaches, and the beginning of a new and potentially very tough year emerges, it’s time to think carefully about your business and personal finances.
Before June 30th take some time to look at both your expected taxable income (essentially your business’s assessable income, minus any allowable deductions) for the current financial year 2019-20; and your projected/expected taxable income for 2020-21.
If you are expecting to have a higher income this financial year, compared to your projections/expectations for the next financial year, you should talk to us to consider the following:
Prepaying some of your 2020-21 expenses (such as your rent, insurance or subscriptions to professional associations) in the 2019-20 financial year. Up to 12 months of the following year’s expenses can be deducted in this current tax year.
Taking advantage of the instant asset write-off, which enables you to immediately deduct assets you purchase for your business costing less than the associated threshold (whether the asset is purchased new or second-hand). Thresholds have changed over the past few years, and will reduce to $1000 from 1 July 2020, so check the ATO website for full details or give us a call.
Other options may be reviewing and postponing some of your invoicing for the current tax year, if appropriate.
However, if you are expecting to have a higher income next financial year (2020-21), you can talk with your us to consider:
If it’s appropriate to do so, bring forward any invoicing into the current financial year for scheduled work that will be carried out in the next financial year.
Paying your expenses as they are due is another tax strategy, rather than pre-paying them in advance this tax year.
Note: Avoid spending on business assets for the sake of claiming tax deductions, In most cases, you’ll find yourself paying $1 to save 30 cents* in tax (*based on the most common business tax rate).
You could also take advantage of the government’s instant asset write-off which affects those with an annual turnover of less than $500 million.
However, as part of your tax planning you should compare which is better: instant asset write-off vs depreciation.
For example, as businesses grow and make more income, there may be a greater benefit in not using the instant asset write-off, as you may lose out on on-going deductions and depreciation.
If your business carries stock, do your stock take as at 30 June 2019. NB: If your estimated closing stock (and opening stock) is less than $5,000 you do not have to do a stock take.
If you have been affected COVID-19, the ATO can help by:
giving you extra time to pay your debt or lodge tax forms such as activity statements
fast tracking any refunds owed
setting up a payment plan tailored to your individual circumstances including interest-free period
remitting penalties or interest charged during the time you have been affected.