How You Can Make the Most Out of Your Tax Deductions
The world came to a standstill in 2020 due to the global pandemic. Businesses across all industries globally were heavily affected, with many having to close for good. With 2021 comes a new financial year, and a sense of hope that things will get better.
Given all of that, it can be quite overwhelming to deal with your tax deductions. What, exactly, can you now claim? How much is the proper amount to do so? What about stimulus in varying degrees?
Let's look at how you can make the most out of your tax deduction.
Cost and Expenses
While these words are generally interchangeable during daily conversation, they have different meanings when it comes to accounting and business.
Cost - This is money needed for something to be bought, created or done. Examples include a new desk for your office, personalised stationery or shipping items.
Expense - Money spent on the organisation or company to generate revenue. Examples of this are essentially whatever helps your business to run and make a profit such as marketing, rent and utilities.
A tax accountant in the Gold Coast will tell you that most costs involved in your business being run can be claimed, which will, in turn, lower the taxable part of your income.
Australian law states that whether your records are digitised or printed out, they need to be kept for 5 years and should only be in English.
The Australian Taxation Office (ATO) has a standard formula for calculating your taxable income. Your tax deductions are subtracted from your assessable income. Take note that expenses claimed have to be "business" in nature; they have to be related to your business, and easily justifiable.
Additionally, if your business holds stock, do a review of your stock valuation. Any stock that is damaged or obsolete should be written off. Look into a stocktake, bearing in mind that stock can be valued from whichever is lower between cost price or expected selling price.
If your business is amongst those that were heavily hit by events due to the coronavirus pandemic, you could possibly get assistance from the ATO through:
Cancelling interest charged and any penalties your business received during the time it was affected
Extra time to lodge activity statements and other tax forms
More time to get your tax bill paid
Offering a tax payment plan that includes an interest-free period, customised according to your circumstances
Tax Liability Reduction
In order to lower your liability with taxes, be sure that you can claim everything you're entitled to. Also, claim expenses that are related to your business' operations, such as:
It should be noted that stimulus packages must be treated as regular salary or wage and considered taxable income.
The global pandemic has thrown many businesses into a tailspin, and it's perfectly normal to be overwhelmed. Now more than ever, it is incredibly vital to save money where we can. Maximise your tax deduction and start the new financial year fresh.
Looking for the best accountants in the Gold Coast? Reach out to New Wave Accounting! We provide end-to-end accounting and bookkeeping services that help scale and grow businesses.