Tax is necessary to pay for schools, hospitals, roads and additional things that we may or may not agree with.
Australia’s tax system does make some allowances for businesses and there are ways to increase your bottom-line.
McKitterick Chartered Accountants principal Brooke McKitterick says protecting cash flow is a priority, so decisions should be made around this.
Some tax tips for increasing your bottom line and managing taxation are:
Knowledge and understanding
The first thing is to make sure you understand the profit and loss statement and a balance sheet. Once you understand this, then you can see where costs can be cut and where you can make changes to reduce unnecessary spending. It also ensures you are aware of your current debt levels and asset base of your business.
Instant asset write-off
If you are a Small Business Entity with an aggregated turnover of between $10 million and less than $50m and you buy a business asset that costs $30,000 or less, you can get the full asset write off (until June 30, 2020). Various thresholds, turnovers and dates previously applied, so it’s best to refer to the Australian Tax Office for details.
Superannuation
McKitterick says many businesses owners fail to contribute to their own superannuation, but it can be cost effective to do so. Not only do you save for the future, but it also reduces your taxable income and contributions tax is a lower 15 per cent into superannuation. It will depend on your business structure as to how this is best arranged.
Trade debtors
A trade debtor is someone who hasn’t yet paid for your goods or services that they’ve used/acquired. If you have a strict policy for debtors to pay you in a timely manner and you don’t let them build up, you have more cash flow to invest back into the business and also reduce debt
Fixed asset register
This is a list of fixed assets that your business owns. If you review it on a regular basis, you can identify items that are obsolete or have been written off and therefore get a deduction for this cost.
Adjust your pricing
If your sales aren’t where they should be, evaluate your pricing and determine if it’s fair – not only to your customers, but to you. If sales are good but earnings are not, it might be time for an increase. Look at what competitors are charging and consider an increase that will help your profit, but not drive customers away.
Reduce interest payments
If you’ve been in business for a while and have established good credit, you may be able to qualify for a loan or business credit card at a lower rate than when you were just starting out. Talk to your banker about your existing loans and see if they can be refinanced or consolidated.
Don’t stop learning
No matter how good you are at your job, don't ever become too comfortable. Never stop learning and looking for ways to improve. Times change, as do technologies. Stay on the cutting edge as much as possible. Attend industry events, read industry publications, and stay in the know.
Professional help
“Always have a tax planning meeting between March and the end of financial year. This way you have time to review your business position and estimated tax position and make decisions prior to year-end to help minimise your tax liability where possible,” McKitterick says.
