It is never too early to focus on your tax planning in order to minimise tax, reduce risk and be prepared financially.
Effective tax planning is something that should be considered year round and making it a priority can result in you paying less tax liability. Preparing and updating a forecast of income and outgoings can also help you and your business identify times when money may be short and plan accordingly.
Business
1. Claim for training courses
Employers can claim a tax deduction for education expenses that have a satisfactory connection to an employee’s current employment, maintain or improve the skills or knowledge required for the employee’s current role, or result in an increase in the employee’s income.
2. Review your business structure
There are four commonly used business structures in Australia; sole trader, partnership, company and trust. Business owners need to understand the responsibilities of each structure, since each structure affects the tax they’re liable to pay, asset protection and ongoing costs. Reviewing your current business structure will establish whether it is still appropriate for your business’s current situation.
3. Write off bad debts
Businesses can write off bad debts to claim a tax deduction and receive a GST credit on their next BAS (if they are registered for GST on an accruals basis) provided that:
• The business has tried to recover the debt and has exhausted all efforts for it to be recovered with no reasonable expectation of payment.
• The bad debt is formally written off in the accounting records prior to the end of the financial year.
• The debt owed is included in your assessable income in the current financial year or earlier financial year.
4. Claim deductions for depreciating assets
Small businesses can claim an immediate write off of up to $20,000 for eligible assets they start to use, or have installed ready to use, and paid for, from 12 May 2015 until 30 June 2017.
The $20,000 limit can be applied to as many items as they wish. Assets that cost $20,000 or more are added to the entity’s small business pool and depreciated at 15 per cent in the first income year and 30 per cent each income year thereafter.
5. Apply the 15 year exemption
Small business owners aged 55 or older who retire or become permanently incapacitated, and have owned a business asset for at least 15 years, are exempt from paying CGT when they dispose of the asset.
6. Use the 50% active asset reduction
Small business owners can reduce the capital gain on an active asset by 50%. An active asset is a tangible or intangible asset that is used or held ready for use in the course of carrying on a business.
7. Consider applying the small business rollover. Small business owners who make a capital gain from selling an asset can defer the CGT on the capital gain, as long as a replacement asset is acquired within two years.
