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Getting the most out of your tax return – it’s just smart

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With less than a week left for businesses to perfect their tax returns, time is running out for SMEs to claw every penny back from the ATO. Experts are wondering: have you done all you can?

Now’s the time to take drastic action, but it’s also a time for reviewing your business overall – and making sure you have the right steps in place for next year.

“My message to a lot of business clients now is that they should have had some tax planning done,” says accountant and business adviser Amanda Gascoigne.

“If they haven’t, now’s the time to put it in the diary for next year.”

Stacey Price is the head of Healthy Business Finances. One problem she comes across is that business owners search high and low for something to spend money on, in order to deduct that on their tax return.

Find out how MYOB can help you make the most out of your business this financial year. 

Instead, she says, companies ought to remember that wages and salaries can be deducted. In that case, it’s better as the owner to pay yourself a slightly higher wage, then use that money on whatever is required.

“For companies, we often say it’s better to pay an extra wage [to yourself], which is a legitimate tax deduction. You’d rather pay yourself an extra $2000 than give it to someone else just to [get a deduction],” she says.

Although sole traders aren’t able to deduct wages on their return, Price instead recommends tax deductions that tie into their personal finances – such as superannuation.

“You can make a voluntary contribution to superannuation, which is a tax deduction, and it’s great for your long term financial security.”

Experts recommend a series of typical tax moves that are both quick, and save money. For instance, prepaying memberships, subscriptions and insurance costs a year in advance count as a deduction, while refilling stationery cupboards can start your year off organised.

However, Price says businesses need to think carefully about purchasing: “Ask yourself if you really need that item, because you don’t want to buy it just for the deduction” she says.

The deductions people miss

There are always deductions that slip through the cracks, experts say. For instance, business owners often don’t realise they can deduct expenses for keeping up a professional library, for office furniture, or for the work-related portion in using mobile devices and internet connections.

Reviewing your transactions through the year can easily identify small expenses that can be used as deductions. Software subscriptions to services like Dropbox or even your web hosting are small items, but often left unnoticed.

Working from home can allow a business to deduct mortgage and rental costs, along with utilities, though it depends on the type of work being done and must be apportioned based on how many hours were worked – and the workspace as a proportion of the overall property floor plan.

Also consider your work environment. Business owners working outside could deduct sunscreen or sunglasses. Do you run a fitness-related business? A gym membership may be on the cards.

Bags or handbags are also deductible, just as long as they’re specifically for work and you can prove that.

Businesses can also consider reviewing the need for written evidence. Generally, deductions require a receipt but the ATO does allow for exceptions in some circumstances.

If you don’t have a receipt, then you need to provide other written evidence, or show that you took “reasonable steps” to prevent the receipt from being destroyed. Just in case, Amanda Gascoigne recommends putting all your receipts into a digital format across the year.

If you can show that evidence, it’s worth considering whether to claim those expenses. But you should consider putting a system in place so that doesn’t happen, says Gascoigne.

It’s all about planning

Beyond simple deductions, Gascoigne points out that planning for tax is really about planning for your business. Using a tool like accounting software to judge your profitability will inform your vision for the year ahead – and give you a warning as to how much you need to make.

“This isn’t just a tool to do the books, it’s about seeing your profitability…you need to work out your vision for the business. Now is the perfect time to do that,” she says.

“Look at your client base, if there are customers you need to get rid of, or if they’re not profitable for you. That is going to set you up for the entire year, not just tax time.”

This insight was brought to you by MYOB, helping businesses succeed. To read more insights to inspire success, head on over to The Pulse by MYOB

 

 
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