Tax planning strategies: How to get the most value from your taxation

Business Services

With the month of June fast approaching, the end of the financial year is in sight, which means now is the time to prepare and develop a tax planning strategy.

While specific tax planning strategies will differ from business to business, and person to person based on individual circumstances, there are three areas of focus that can be applied to all tax planning situations.

  1. Decrease your taxable income
  2. Increase your tax deductions
  3. Lowering your tax rate

Keeping these in mind, the following are some examples of strategies you may wish to consider.

Contributing to your superannuation

Making concessional (before-tax) contributions to your superannuation fund can help reduce your taxable income. You can contribute up to $25,000, this includes any super guarantee payment made by your employer.

Write off bad debts

You can claim a deduction on unpaid debts that are considered “bad debts” if you have recorded the sale as income in the current or previous financial year, and the debt has been written off as “uncollectable” in the same fiscal year as the deduction is claimed.

While writing off bad debts can be tax effective and should be done regularly, there must be clear evidence that the debt cannot be recovered, rather than it being just ‘doubtful’ because the client pays late.

Consider your invoicing strategy

Depending on your tax situation, you may want to consider the timing of invoices for work you expect to flow through to the next financial year. For example, where you begin work for a client in June and it carries through to July, you may decide to send a full invoice to the client once the work is completed in July. The income is then assessed in the following financial year. On the other hand, you may want to send an interim invoice while still working on the job, and a final invoice once it is completed. The taxable income will then be spread over two financial years,

Review you inventory at the end of the financial year

It is important to review inventory items that are outdated or compromised, as their value may be considerably less than newer items in your catalogue. You may wish to revalue stock at market value rather than its original price, or write it off completely if it is obsolete.

Business concessions

Depending on the size of your business, you may be able to claim a variety of concessions relating to; income tax, capital gains tax, PAYG instalments, FBT, superannuation, and GST.

The table below outlines some of the more common deductions that can be claimed. Additional information can be found at the ATO website. (Please note that certain concessions may be impacted by the Covid-19 stimulus packages, so please get in touch with us if you need assistance).

 

 

 

 

 

 

 

 

 

 

If you would like more information on tax planning, or advice on how to best approach the end of the financial year, please contact us at AWT Accountants and we will work with you to help you achieve your taxation goals.