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As a business owner, you’re no stranger to the importance of managing your finances effectively. Tax planning is a crucial aspect of this financial management strategy, ensuring that you minimise your tax liabilities and maximise your savings before the proverbial horse has bolted for this financial year

When it comes to tax planning for business owners, proactive steps taken throughout the financial year can make a significant difference in your bottom line. Waiting until the last minute, such as July or August when you’re lodging your tax, could mean you’re essentially donating extra money to the government. 

Here’s why April is the ideal time to start plus some practical tax-saving tips for you and your business:

1. Start Early, Reap the Benefits

• The decisions that will save you and your business the most tax are not those made after 30 June each financial year; they’re the decisions made in April and May so that you have enough time to implement the strategies before 30 June comes around.
• April is the ideal time to kickstart your tax planning efforts. By starting early, you have ample time to assess your financial situation, identify potential tax-saving opportunities, and implement effective strategies.
• It’s also far less stressful to avoid the rush and chaos of last-minute tax-related decisions in June. Procrastination often leads to missed opportunities and increased tax liabilities.

2. Know Your Deductions

• Familiarise yourself with the deductions available to business owners. This includes expenses such as business-related travel, office supplies, equipment purchases, and professional fees. Refer to our checklist later in this article.
• Then be sure to keep detailed records throughout the year to substantiate your deductions and maximise your tax savings.

3. Leverage Asset Depreciation

• Take advantage of depreciation allowances for assets used in your business. Understanding the depreciation rules allows you to spread out the cost of capital assets over their useful lives, reducing your taxable income.
• Consider timing asset purchases strategically to maximise depreciation benefits.

4. Explore Tax Credits and Incentives

• Research available tax credits and incentives applicable to your business. These may include research and development tax credits, energy-efficient equipment incentives, and hiring incentives for certain industries.
• Stay informed about changes to tax laws and regulations that could impact your eligibility for tax credits and incentives.

5. Optimise Business Structure

• Evaluate your business structure to ensure it aligns with your tax planning goals. Different structures, such as sole proprietorships, partnerships, corporations, and trusts, offer varying tax implications.
• Consult with a tax professional to determine the most tax-efficient structure for your business and explore opportunities for restructuring if necessary.

6. Manage Cash Flow Effectively

• Implement strategies to manage cash flow efficiently, such as timing income and expenses to minimise tax liabilities. For example, consider deferring income or accelerating deductible expenses where possible.
• Maintain a cash flow forecast to anticipate tax obligations and plan accordingly throughout the year.

7. Invest in Retirement Planning

• Take advantage of retirement planning options available to business owners, such as self-managed superannuation funds (SMSFs) or contributions to employee retirement plans.
• Contributions to retirement accounts can provide immediate tax benefits while helping you save for the future.

8. Stay Compliant and Seek Professional Advice

• Stay updated on tax laws, regulations, and deadlines to ensure compliance with reporting requirements. Failure to comply can result in penalties and additional costs.
• Seek guidance from qualified tax professionals who specialise in working with small and medium business owners. Our team at The Hendrie Group can provide personalised advice tailored to your specific circumstances and help you navigate complex tax issues.

Potential tax-savvy strategies to minimise your business tax this financial year

We mention “potential” in the above heading because your available tax strategies will depend on your business structure and specifics relating to your type and size of business. 

That’s why it’s important to sit down with us for a tax planning session in April or May to explore all your options and then have time to implement the strategies.

In the meantime, here’s a list of…

14 tax-saving strategies to consider for your business

1. Determine Small Business Eligibility

Assess whether your business qualifies as a “Small Business Entity” to access various tax concessions from the ATO. To qualify, your business should have an aggregated turnover of less than $10 million and operate for all or part of the 2024 financial year.

2. Leverage Lower Company Tax Rates

Explore the reduced company tax rate of 25% for businesses with turnovers under $50 million, provided a certain percentage of income isn’t passive. Consider allocating profits to a “Bucket Company” within a Trust structure to cap your tax at this advantageous rate.

3. Capitalise on Full Expensing for Asset Purchases

Take advantage of immediate deductions for eligible depreciating assets costing less than $20,000. Purchase and utilise these assets before 30 June 2024, to qualify for a tax deduction in the current financial year.

4. Maximise Deductible Super Contributions

Ensure you stay within the concessional superannuation cap of $27,500 for 2024 to avoid additional taxes. Make sure your contributions are aligned with your overall retirement plan and are made before the 30 June 2024 deadline.

5. Utilise Tools of Trade and FBT Exempt Items

Explore the tax benefits of purchasing FBT exempt items such as tools of trade, computer software, and electronic devices. Proper structuring allows for tax deductions for employers and salary packaging benefits for employees.

6. Prioritise Repairs & Maintenance

Make necessary payments for repairs and maintenance before 30 June 2024 to claim deductions in the current financial year, whether for business, rental property, or employment purposes.

7. Ensure Timely Employee Superannuation Payments

To claim tax deductions for the 2024 financial year, ensure that employee superannuation payments are received by the super fund or clearing house by 30 June 2024. Avoid last-minute payments to mitigate processing delays.

8. Strategically Defer Income and Bring Forward Expenses

Defer issuing invoices and receiving cash payments until after 30 June 2024 to defer tax obligations. Conversely, bring forward expenses such as consumables and marketing materials to claim deductions in the current financial year.

9. Delay Investment Income & Capital Gains

Arrange for investment income and capital gains to be received after 30 June 2024 to defer taxation. Ensure transactions are structured to align with tax planning objectives, considering contract dates for sales.

10. Maintain Accurate Motor Vehicle Records

Keep detailed motor vehicle log books or claim up to 5,000 business kilometres using the cents-per-kilometre method. Ensure records are maintained up to 30 June 2024 to support tax deductions for motor vehicle expenses.

11. Maximise Investment Property Depreciation

Arrange for the preparation of property depreciation reports for rental properties to maximise depreciation and building write-off deductions. Take advantage of available deductions to reduce your taxable rental income.

12. Conduct Year-End Stocktake and Write-Off Bad Debts

Prepare detailed stocktake and work in progress listings as of 30 June 2024 and write off obsolete or worthless stock items. Likewise, confirm bad debts before the end of the financial year to reduce your profit and tax.

13. Leverage Small Business Concessions for Prepayments

Make prepayments on expenses such as loan interest and rent before 30 June 2024 to obtain full tax deductions for the 2024 financial year. Maximise available concessions to reduce taxable income.

14. Execute Trustee Resolutions for Family Trusts

Ensure trustee resolutions for discretionary trusts are prepared and signed before 30 June 2024. Stay informed about recent tax rulings affecting trust distributions to keep your tax planning strategies ahead of the curve.

Book your tax planning session for April or May

Effective tax planning is proactive tax planning, especially for business owners. The team at The Hendrie Group assist small and medium sized businesses in Melbourne and Australia-wide. 

By starting early, understanding available deductions and incentives, and implementing strategic tax-saving strategies, you can maximise your financial resources and support the growth of your business. We cannot emphasise enough, don’t wait until the last minute—take control of your tax planning today and get in touch with us to book your proactive tax planning session.

With the right tax strategies in place, you can keep more of your hard-earned money where it belongs—in your business and your family’s wealth.