4 Ways Your Small Business Can Reduce Your Tax Contribution
Individuals and businesses in every country are required to pay their taxes. The money spent on taxes goes a long way towards supporting common resources, building infrastructure, and funding public places and activities. Having a small or startup business does not exempt anyone from the said responsibility.
In Australia, the amount of income tax your business should pay depends on its taxable income. You need to subtract your business deductions from your gross income to calculate your income tax. If you can claim more deductions for your business expenses, then you can reduce your tax liability.
For businesses looking into possible and legitimate ways to achieve a lower tax rate, here are some suggestions that could help you:
Tip 1: If you recently purchased an asset, claim for depreciation
If your business’ annual income is below $10 million, you are eligible to claim an instant asset write-off. The government will reduce your taxable income in the financial year you bought and installed these assets. However, you need to remember the following:
You must have purchased the asset during the year you plan to include it in your instant asset write-off application.
Your new or second-hand assets should be below $20,000.
Make sure to check all recent changes about the rule from this link.
Tip 2: File for your vehicle use
If your business utilises a vehicle in its operations, you should know that it is tax-deductible. Before filing for one, you need to make sure that you:
Maintain a logbook that includes all vehicle usage information
You keep all the invoices and receipts (including petrol expenses and maintenance fees)
Tip 3: Choose concessional superannuation contributions
As an employee of your business, you should be paying a percentage of your earnings into your super account. If you want to save more on this business expense, choosing a concessional contribution taxed at 15% can help you pay less tax in the long run.
However, this suggestion is only possible if your earnings are more than $37,000 each year. You must also keep your contributions not more than $25,000 every financial year.
Tip 4: Claim deductions on the business expenses you have not yet paid by EOFY
The fiscal year in Australia runs from the first of July to the thirtieth of June. If you have other business expenses that you have recorded but have not yet paid by the financial year’s end, you can still claim deductions on them. These include:
Repairs and maintenance in the office that are billed on or before the thirtieth of June that have not been paid
Bonuses you have provided for your employees on or before the thirtieth of June that have not yet been paid in full
Salaries that are still unpaid on the thirtieth of June
Understanding income tax for a business is already challenging for business owners. Identifying other ways you can lower down your tax contributions can feel even more overwhelming. The surest way to reduce your business tax is to hire a small business accountant in Gold Coast. An accountant can ensure that your business follows all the tips mentioned here, and they will continually look for many opportunities to reduce your business’ tax bills.
New Wave Accounting & Business Advisory is an end-to-end accounting and bookkeeping service provider determined to help our clients scale and grow their business. Contact us today at (07) 55041999 if you need a tax accountant in the Gold Coast, and we will help you save on taxes and take your business to the next level.