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Tax Saving Tips for Small Businesses: 6 Must-Do Tasks Before Financial Year End

With the financial year end approaching in three months, it's time to brace up for the tax season. In this article, we’ll share with you six simple tips that can help alleviate your tax stress and possibly reduce your tax bills. Whether you're a seasoned business owner or just starting out, these tips can make a real difference in your tax liability. Read on below to learn more.

1. Gather your financial records

One of the best ways to ensure a smooth and stress-free financial year-end is to gather your financial records in advance. Instead of waiting until the last minute to sift through stacks of bank statements, receipts, and invoices, why not take a proactive approach and collect them early on? By doing so, you can provide your accountant with everything they need to estimate your taxable income for the year and offer you valuable advice on how to minimize your tax bill.

By procrastinating or failing to prepare, you run the risk of limiting your accountant's ability to assist you in saving money. Don't let disorganization cost you. Start gathering your documents today and put your mind at ease.

2. Write off bad debts

Writing off bad debts refers to the process of removing or adjusting the unpaid balances from the accounts receivable records of a business. It is a necessary step in managing the financial health of a company and reducing the tax liability on assessable income. The bad debt deduction is available to businesses that use the accruals basis of accounting, and it allows them to claim a tax deduction for the unpaid amount if they have made reasonable efforts to recover the debt but have been unsuccessful.

To write off bad debts, the business must have evidence to show that it is highly unlikely that the customer will pay the outstanding balance. This could include evidence of bankruptcy or insolvency, death, disappearance or relocation of the debtor, or other factors that make the debt unrecoverable.

3. Superannuation contributions

Superannuation contribution is a mandatory payment made by employers to their eligible employees' superannuation fund. The amount of contribution is based on a percentage of the employee's ordinary time earnings and must be paid at least quarterly.

To avoid the super guarantee charge (SGC), employers must make payments by the quarterly super due dates, with the deadline for the final quarter falling on 28 July. It's important to note that superannuation contributions are only tax deductible when paid, regardless of the tax accounting method used. Therefore, to claim a deduction in the current income year, the superannuation contributions must be made before 30th June.

4. Stock-take

Stock-taking is an essential process that involves the physical counting and verification of all items in a business's inventory. It ensures that the actual stock levels match the recorded levels in the business's inventory management system. This helps identify discrepancies and issues arising from theft, errors, or mismanagement.

Regular stocktakes improve efficiency and profitability by analyzing inventory levels and trends to determine which products sell well and which do not.

Removing obsolete or damaged stock from a business's books reduces the amount of taxable income reported to the government, resulting in significant savings that can be reinvested in growth and development opportunities.

5. Prepay expenses

A prepaid expense is a cost for goods or services that will be provided in the future, either wholly or partially.

Small businesses with less than $10 million in revenue can immediately deduct prepaid expenses for up to 12 months, which can bring forward deductions and reduce the tax liability for the current financial year. However, not all prepaid expenses are eligible for immediate deduction. If the service period extends beyond 12 months, the deduction will be spread over each financial year, up to a maximum of 10 years.

Prepaying expenses requires access to available cash, so careful planning is essential to ensure that the necessary funds are available.

6. Asset purchases

One way to reduce your taxable income and lower your tax bill is to take advantage of the instant asset write-off provisions. Eligible businesses can immediately deduct the cost of assets purchased that are ready for use before the end of the financial year. The current threshold for the instant asset write-off is $150,000. However, not all assets are eligible, and there are specific rules for each one.

Before making any asset purchases, carefully consider your cash flow situation. While the immediate deduction can be beneficial, ensure your business has enough cash flow to cover the costs. If cash flow is a problem, it may be best to delay any purchases until the financial situation improves.

To sum up, there are several strategies you can use to reduce your tax liability, including gathering financial records, writing off bad debts, making superannuation contributions, conducting a stock-take, prepaying expenses, and taking advantage of the instant asset write-off provisions. By taking a proactive approach and planning ahead, you can maximize your tax deductions and potentially save thousands of dollars for your business. So, start implementing these tips today to prepare for the end of the financial year.

If you require assistance with bookkeeping or advice on minimizing your tax bills, please don't hesitate to reach out to our friendly team today.


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