6 End of Financial Year tax tips for small business and soloists
Poor planning is one of the killers of small business. One big item that many small business operators fail to plan for is TAX, writes Sharon Williams, founder Taurus Marketing.
Unfortunately, the better you do, the more you pay. The country has to run and we as small business owners contribute much to keep the economy going, on average paying 27.5% company tax. It’s not easy, it’s not fun, it doesn’t seem fair and unfortunately, it’s not going to go away. But it is legal to minimise tax and take advantage of the unparalleled deductions and offsets the Government has put in play during this pandemic period to help us.
Respect tax, whether you like it or not
The tax year runs from July 1st to June 30th. Get on top of it. It makes tax time far less daunting and frightening and keeps you protected from any hidden surprises – so take time to plan properly! At the end of the day, tax is your responsibility.
This month as we hit winter solstice, end of financial year tax planning is a priority. Contact your accountant and get across end of year planning to understand the consequences for your personal tax situation and that of your company, so there are two conversations to have.
After 25 years in business, I have learnt a lot from personal experience and mistakes. Small business is tough enough and we don’t need unexpected surprises. Here are some tips to help get year-end ready.
- Do your research to understand what tax deductions you can claim – knowledge is power
My first tip is to ask your accountant which of the Government tax offsets, deductions and subsidies affect you, your set up and your industry sector. Small businesses can access a range of tax concessions from the ATO. To qualify as a Small Business Entity, your business must have an aggregated turnover of less than $10m. Get on the internet, speak to the ATO, or business mentors and get across the initiatives you can take advantage of through COVID-19 both in terms of personal tax and as a business owner.
- Pay for expenses by the right date so you don’t miss out
For a tax deduction in the current financial year, an expense must be paid for or incurred prior to 30 June. For example, the immediate deduction for assets costing less than $150,000 must be installed and ready for use by 30 June, superannuation must be paid for before 30 June.
- Find out your tax liability now, what’s the figure likely to be?
Ask your accountant for an estimate of your tax liability for the year. This will help you plan for taxes due and also consider any opportunities to minimise the amount payable.
- Plan cashflow to enable you to pay your tax on time
Tax days come throughout the year, so you need to be prepared to have that cash ready to avoid penalties and interest for late payment. In addition to planning your cash flow for normal operating expenses, planning for company tax, GST and other tax payments are as equally important.
Top Tax Questions
What can you take advantage of the current govt subsidies?
What is your accountant estimating that you will need to pay in tax?
When is your tax due to be paid?
What is a tax deduction? What can you claim?
- Moving forward be prepared – failure to prepare is being prepared to fail
One common mistake made by most small business operators is using GST collected to manage business cash flow and then come unstuck when these amounts must be paid to the ATO.
The best way to prepare for tax payments is to set it aside as you collect it. Your taxes are then being accumulated ready to pay which is a discipline that makes budgeting easier. My first advisor suggested I do this, and it was one of the best tips I received. Once this money is placed into the account, see it as untouchable and not as money to be used. By the end of the financial year, you will be glad to have your taxes ready saved.
- ‘Discipline is the bridge between goals and accomplishment’ – Jim Rohn
Being disciplined with your taxes is good advice. Putting off taxes until the last minute or not having it as a priority can lead to mistakes, cash shortages and needless panic. Be strict in keeping your records, car travel logs, receipts and making payments. Pay your suppliers quickly and practice foresight and common sense about looking after people.
One of my frequent quotes is ‘routine sets you free’. Get into the routine of making tax a part of your monthly agenda. This way you can work to prevent surprise bills. Make your accountant your friend. In addition to our many responsibilities and roles, we as business owners need to take tax head on, stay ahead of the game and save ourselves from nasty surprises.
And if concerned, ring the tax office. They are motivated, on the whole, to keep small business going. If you need help, ask. Payment plans are available with minimal interest.
Sharon William is an award-winning entrepreneur, CEO and founder of Taurus Marketing and one of our Small Business First champions.
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