While tax planning is important, it may not always land on top of a business owner’s priority list. Let’s face it, who really likes paying tax? It may be even pushed aside until the deadline comes to a close, considering all of the things you need to think about and attend to in running your business–managing cash flow, your employees, business strategies, your clients, and so much more.
But, no matter how much you try to avoid tax planning, it still is a key component to managing your business and maximising your business income. Here are 4 things to consider for your tax planning in next end of financial year.
Mark your calendar for all important tax dates
Having an ATO debt is a huge bummer. Not only does it make your financial records look bad, it can hurt your wallet too. The ATO automatically adds a general interest charge (GIC) to the amount you owe to them. This interest amount grows the longer the debt is unpaid.
So, to make sure you always lodge and pay tax on time, you must always keep an eye on key tax dates. The list of dates are available at the ATO website. Remember, it’s important to always lodge on time, even if you can’t pay yet. This will show the ATO that you acknowledge your tax obligations and will pay them when you can.
When you lodge your return, you should include assessable government payments such as JobKeeper and other income, and report any rental relief received as a commercial tenant. You may lodge online using myTax if you’re a sole trader, or you could use a Registered Tax Agent or Standard Business Reporting enabled software if your business is a company, trust, or partnership.
Know your tax obligations
Your taxable income and tax rate will depend on your business structure, income, and activities. Businesses are also allowed to choose their tax payments–monthly, quarterly, or annually. The common taxes for businesses are Company (income) Tax, Capital Gains Tax (CGT), Goods and Services Tax (GST), and Payroll Tax.
Both resident and non-resident companies are subjected to company tax at a rate set by the Australian government. This may vary under limited circumstances such as industry and business structure.
Capital Gains Tax (CGT) is applied to the profit made through the disposal of assets, including selling and is paid as part of income tax. Foreign entities may also be subject to CGT on assets acquired and used in running a business in Australia.
The Goods and Services Tax (GST) is levied on goods and services sold or consumed in Australia. Payroll Tax is a state tax withheld from employees’ wages. This is calculated on the amount of wages paid per month. Payroll tax must be paid if the total Australian wages goes beyond the exemption threshold in the relevant state or territory.
Keep an eye on all possible tax deductions and concessions
Business owners often overlook a lot of eligible tax deductions. These deductions may come from expenses incurred for your business or your work such as rent, super contributions, worker’s wages, and other operating expenses.
Currently, there are three temporary tax depreciation incentives available to eligible businesses: Temporary full expensing, Increased instant asset write-off, and Backing business investment. You may learn more about this on the ATO website.
Keep all your financial records
Keeping an up-to-date record of all your business-related income and expenses, balance sheets, bank statements, asset details, and other accounting documents is always a good move in tax planning. These records are also important when lodging your taxes. This helps you see all deductible expenses when you prepare your tax returns.
Once you’re ready with all of the items mentioned above, you may now start preparing your payment details. Always ensure that you enter the correct payment reference number (PRN) or EFT code to make sure that your tax payments are credited to the correct account.
Remember, tax planning may be time-consuming and tricky, but it cannot be pushed aside as paying tax is an important obligation.
If you need assistance in setting up your tax strategy, Accelerated Prosperity is here to help. Contact us to set up an appointment and let’s discuss your specific needs.