The Small Business Owner’s Guide to Minimizing Taxes

The Small Business Owner’s Guide to Minimizing Taxes


Running a small business is tough, especially since you have to make sure that the cashflow is smooth running at all times. One of the biggest obstacles of a smooth running cashflow is running tax amounts. While taxes are indeed mandatory (and a legal obligation), you wouldn’t want to pay more tax than you absolutely must.

Here are some tips to help you plan and minimize your taxes as much as possible:

Utilize the $20,000 immediate asset write-off: In the 2015 Budget, the Federal Government announced that all small businesses which make a certain could avail an immediate deduction for purchasing assets that cost lower than $20,000, thus replacing the previous threshold of $1,000. To be eligible to avail this benefit, you must make sure that your assets are already installed and ready for use by the right time. In the event that you either do not need or cannot afford any assets (due to low cashflow), you still can avail an immediate deduction by writing-off the balance of a small business pool that has a written down value of below $20,000.

Increase your superannuation contributions: Planning for the future is a very instrumental factor for small business owners. One major factor at play in this regard is superannuation – something that you must definitely pay attention to. During the process of maximizing concessional contributions, make sure to includes the compulsory 9.5% in the limit, and ensure that every payment is received in the super fund before deadline.

Cover your expenses with prepayments: One of the best methods of maintaining a good cashflow situation is to cover expenses via prepayments. By making prepayments of at least $1,000 (within 12 months before the deadline), you can help your business become eligible for deductions. Prepayments under $1,000 are deductible as well and need no service period.

Consider Capital Gains Tax event timings: In the event that you are trading as a trust or an individual, you must check if you are eligible for the 50% General Discount for proposed asset disposals. You may also be eligible for other small business discounts and concessions, like Rollover Relief or Active Asset. In order to be eligible for these, you must have held possession of the asset for a minimum of 12 months.

In the event that you intend to dispose-off an asset, you must first consult with your tax adviser. The tax adviser will help you understand the ramifications and consequences of transactions involved in disposing-off assets, and help you become aware of any concessions that you may be able to avail.

Write off any bad debts that have no possibility of being collected: If you are amongst the many small business owners who pays on accruals basis and has considerable debts to repay, you must consider sorting them out and writing them as much as possible before the end of the fiscal year in order to make sure that you can claim a tax deduction in the new one. During the process of writing-off bad debts, do ensure that you are following the protocols that determine whether debt is really bad, and that you have taken the required steps to collect said debt.

Write off any stock that is obsolete: Any stock that is dead and obsolete is nothing but a liability on your record. Make sure that you avoid having such stock actively present on your records by conducting a stock take before fiscal year end, and write-off any that you find obsolete. Not only will you get a cleaner record, you will also have a reduced amount of tax liability.