I am yet to meet anyone, other than an accountant, who gets excited about tax time.  With a fear of a tax bill, a loathing of paperwork and complex web of tax law to navigate it is no wonder most people find it a bit overwhelming, but with our savvy tips tax time will be a breeze!

Tip 1:  Know your numbers

The best way to avoid tax fright is to know your numbers.  With a few weeks to go before the end of June, now is the best time to do a few quick calculations to estimate your income, expenses and your tax payable.  Once you know where you are at you are ideally placed to make some decisions on how best to manage your income and expenses before 30 June rolls around, or at least start thinking about how you are going to meet any tax shortfalls.  Read on for tips on how to manage income and expenses.

Tip 2:  Manage income received

As a small or micro-business you are able to account for your income on a cash basis.  This means if the money has not been received from your customers or clients then you won’t be taxed on it, even if you have sent an invoice.  If you are wanting to reduce your taxable income you can delay invoicing so that you are not paid until 1 July or just after.

Tip 3:  Manage your expenses

Businesses can claim a tax deduction for business related expenses that are both paid and incurred.  This means that you not only get a tax deduction for the expenses where the money has left your bank account, but also where you have received the goods or services and not yet paid.  Be sure to keep track of any expenses that fall into the incurred category to give your accountant.

You can also claim a deduction for any expenses that are prepaid for a period of up to 12 months or less.  Some examples of things that you might be able to prepay include:

  • Lease payments
  • Rent of business premises
  • Insurance
  • Interest
  • Business trips
  • Seminars, conferences & training
  • Stationery & consumables
  • Subscriptions

The exception to the 12-month rule, where the period can be longer and you can still claim a deduction, is when the expenditure is:

  • less than $1,000
  • required by law
  • incurred under a contract for services (eg salaries & wages)

Tip 4:  Make super payments

To receive a tax deduction for super in your next tax return, either for yourself or your employees, any contributions for the current tax year must be received by the super fund no later than 30 June.  If you miss the 30 June deadline, and pay by 28 July, then you will need to wait another 12 months before you can claim the deduction.  Miss the 28 July deadline and you miss out on getting a tax deduction all together.

You might also consider making an additional concessional super contribution for yourself.  This is a super contribution that you make and for which you receive a tax deduction.  A limit for concessional contributions of $25,000 applies at the time of writing this.  Before making an additional contribution for super check how much has been paid to date on any salary and wages income earned as this is included in the $25,000 cap.  Go over the cap and you miss out on the deduction for the excess contributions.

Tip 5: Review capital equipment requirements

The instant asset write-off has been both extended until 30 June 2020 and increased to $30,000 from 2 April 2019 ($25,000 from 29 January 2019 to 2 April 2019 and $20,000 prior).  You are entitled to a tax deduction for each asset that falls below the limits.  If you are registered for GST then it will be the GST exclusive cost that will need to be below the limit and if you are not GST registered then the GST inclusive cost of the asset must be below the limit.

Tip 6:  Keep records

For a tax deduction to be claimed, you MUST hold a valid tax invoice, a receipt for payment or some other form of proof of purchase.  The records must:

  • explain all transactions
  • be in writing (electronic or paper)
  • be in English
  • kept for 5 years

You will also need to keep a record for how you calculate the business use percentage for expenses that have both business and private use component such as motor vehicles, mobile phones and home internet.

How can we help?

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Disclaimer: This is general information only and is not advice of any sort.  No warranty or representation is provided by Accounting Heart Pty Ltd as to the accuracy, currency or completeness of the information contained in this summary Readers of this summary should not act or refrain from acting in reliance upon any information contained herein and must always obtain appropriate taxation and / or other advice as may be appropriate having regard to their particular circumstances.