Tax

Four EOFY tax hacks for small-business owners

Helen Baker /

EOFY tax hacks

Financial adviser Helen Baker. Source: Supplied.

Tax time seems to come around quicker and quicker each year, and it can be a hassle — especially if you own a business.

When you’re running your own show, ensuring you get any eligible deductions is vital to reducing your bill and increasing what’s left in your pocket.

Although it may seem daunting, there are some simple things you can do to boost your return — and some may surprise you.

Before June 30

Any steps you can take to improve your position before the end of financial year will serve you well when it comes time to lodge your return. Pre-pay expenses such as subscriptions, certain business travel expenses, training events, leases, rent, phone and internet. These are ‘quick wins’ when it comes to claiming deductions.

If it’s not going to damage your relationships with your customers, hold off on sending outstanding invoices until after June 30 to delay paying tax on the income until the next financial year. Customers might prefer to pay before June 30, so be mindful of this, and balance it out to suit your business. Service work vehicles and pay your employee super contributions to avoid a superannuation guarantee charge.  

When doing your taxes, you can choose to defer unearned income. This is money you have received for work that hasn’t been done yet. Defer this to the next financial year to lower your taxable earnings. You can claim your accountant expenses too, so if you don’t have one already, go get one. It’s the best decision you’ll make all year.

Deductions

Deductions vary depending on your circumstances, but there are a few that are often overlooked, including charitable contributions, software costs, business-related bank fees, interest on business loans or overdrafts, as well as franchise fees that are not part of any initial purchase.

There are plenty of surprising deduction options for home-based business owners too.

Remember, the better your records, the smoother this process will be, so keep a journal of expenses.

Home office deductions include occupancy expenses, such as mortgage interest or rent, council rates, land taxes and house insurance premiums. You can also claim a portion of running expenses such as electricity, phone and internet. Everyone needs office furniture, and that’s eligible too, as well as lesser-known deductions such as cleaning and repair work.

You can claim the full cost, or up to $300, on expensive items of equipment such as computers, printers and telephones, or the decline in value, for items costing $300 or more. You may be able to write-off equipment costing up to $20,000. Computer consumables, stationery, telephone and internet costs can be claimed on an actual expense basis.

The ATO has a home-office expenses calculator to help you pull it all together.

Assets and stock

When it comes to assets and stock, there are a few options to reduce your tax bill.

Write off any bad debts, obsolete trading stock and assets that aren’t working anymore. Pool your low-value assets so they depreciate at a higher rate. Assets costing $300 or less can be written off immediately under certain conditions, and slow-moving stock can be written down.

Sole traders

If you’re a sole trader, you will lodge your business income on your individual return.

If you are earning a personal services income, which is when more than 50% of what you receive for work is for your labour or skills, there are some deductions worth considering.

You can deduct expenses related to acquiring work, including advertising, tendering and quoting for jobs. Registration and licensing fees can also be claimed, as can wages and other expenses involved in engaging a sub-contractor. You can claim a deduction for reasonable amounts paid to an associate for principal work, as well as any costs incurred when complying with workers’ compensation law.

A full list of deductions and tools to help you figure out the nuts and bolts behind your personal services income situation can be found on the ATO website.

Nobody loves tax time, but a little preparation goes a long way.

Check out the ATO app for recording receipts.

Keeping good records will make your tax situation a lot simpler, and with the help of your ‘deductible’ accountant, it doesn’t have to be a headache.

NOW READ: The tax time scams targeting your business and how to avoid them

NOW READ: Who, when and where: The ATO will visit 1,800 small businesses before tax time in a black economy blitz

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Helen Baker

Helen is a qualified Australian financial adviser and author of On Your Own Two Feet: Steady Steps to Women’s Financial Independence and On Your Own Two Feet Divorce: Your Survive and Thrive Financial Guide.

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