Tax Planning for Business before June 30

Posted 28 May '15

Over here at The Empire we are massive believers in plans. Tax plans, business plans, marketing plans, you name it, we love a plan.

The week we strategically planned for the writing of the tax planning blog also happened to fall into the same week of the 2014 tax lodgement deadlines… Coincidence? I think not!

Obviously Beth & Luke were occupied with tax lodgements, so in all their infinite wisdom (?), they have entrusted me with the writing of this very boring exciting topic!

And just to clear it up, by me, I mean, Kate, the marketing chick…

So armed with half an hour of Beth & Luke’s time and my new best friend, The Master Tax Guide, here is my take on Tax Planning and why all businesses should do it!

My first question was…What does it actually mean when your accountant says that you should be tax planning before End of Financial Year?

The aim of tax planning is to get an idea on the current tax position of your business. By understanding where your business is and getting an estimate on the tax you may have to pay, you can then be informed on all the possible ways to improve your situation and make tax savings (legal of course) for this tax year.

Yep, TAX SAVINGS surely I have your attention now.

The underlying objective is to reduce your businesses net taxable income by minimising the gross income and maximising deductible expenses.

Sounds easy enough but this quickly lead to my second question….But How???

Apparently it really depends on your business structure, industry and trading circumstances. Some of the common things we would consider are:-

Superannuation payments

Superannuation can only be claimed as a deduction when it is paid.

This means we could look at paying your June quarter superannuation liability for employees and considering your personal superannuation contributions before the end of the year to ensure you are entitled to claim the deduction this year.

You are going to pay it anyway so really it is an easy win to bring down the tax earlier!

Write off bad debts

The end of the year is a great time to review your debtors and ensure that all monies owed to you are recoverable (and probably a fitting time to chase some of the old ones too!).

Go through your lists and if there are any that you just know are not going to get paid, we can include those bad debts in your accounts to bring down your taxable income. This way you’re not paying tax on income you will never receive!

Purchasing

Purchasing additional items for your business (especially if you are a small business and now eligible for the $20k immediate asset write-off) before the end of the year can again reduce your taxable income.

We only recommend this option for purchases that are calculated and you were intending on doing anyway! Using this as a reason to make a purchase in itself isn’t advisable BUT if you were going to buy it anyway, bringing it forward a month (provided it isn’t going to break the bank) can help to bring down that taxable income!

From this little exercise, I definitely have a greater appreciation for tax planning and understand the important roles it plays within small business. However I must say, the biggest learning of the day was that I chose a career in marketing and not tax!

All jokes aside, it really did seem like Beth & Luke knew what they were talking about and the most important point would be to talk to a professional (you know such as Empire Accountants…hint hint) about your particular circumstances before June 30 hits you!