As tax advisors, the coming months are the most important time of the year. If you are a small business owner, you should consider this as a vital period for you too, because right now is when you are best to conduct your tax planning.
From early May until mid-June, you need to be making decisions on what’s happening in your business from a tax perspective.
If you leave it until July or August… the bird has already flown. Act now.
We can simplify tax planning into four key areas.
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Asset purchases.
If you’ve got a business which is earning less than 10 million in turnover, you can spend on asset items that are less than $30,000 ex-GST before the 30th of June and get an immediate write off.
This is an absolute winner for small business.
Before you buy, ensure that you really do need the item. If you’re gonna fork out 10 grand on a new item, the government will roughly give you back about 30%, so you’ll get back three grand.
Therefore, you’re still out of pocket seven grand.
Assuming you do need the item, and you need it before the 30th of June, asset purchases are a really good way to reduce your tax and keep your business operations going, and they’re good for cash flow.
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Super contributions.
The government started to squeeze super in all areas, but before the 30th of June, especially if you’re starting to contribute more to super and you’re getting a little bit older like my good self, $25,000 per person is the tax deductible amount of super contributions for the 2019 year.
$100,000 per person is amount for non-concessional contributions, meaning you’re putting 100 grand in from your private savings (outside of the business), into your super with no tax deduction, but it’s still getting into that superannuation environment.
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End-of-year adjustments.
This can be relevant for people who are having an absolute booming year in 2019, but they’re expecting that things may not be as good in 2020.
It’s a good idea to try to slow the income down towards the end of the year and maybe increase the expenses. I’ll leave it up to you how to do that – use your own skills, but it’s usually something to do with invoicing and operations and maybe some prepaid expenses.
These end-of-year adjustments, moving income and expenses around, are only relevant for you if you can see either a big or bad year this year or the next year. If you’re steadily growing or you’re going on a level plane with your business, end-of-year adjustments won’t give you much at all.
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Trust distributions.
If you’ve got a growing business in a trading trust, you’ll need a company at some point in your business lifecycle.
Total corporate beneficiary is absolutely vital to minimise your tax. They are superb for cash flow, trust distribution, and to reduce your tax.
However, a trust distribution and the paperwork must be done before the 30th of June. So make sure you talk to your tax advisor about those as soon as possible.
With all four of these areas, it’s important to talk to your tax advisor now.
Have a look at your P&L from the 1st of July 2018 until the end of April or March 2019, and you’ll have nine or 10 months of solid figures that your tax advisor can use to minimise your tax for the 2019 year.
If you’d like some assistance in this space, myself and my team are more than happy to chat on (03) 8393 1000.
