While small and medium-sized business owners have benefited from government initiatives during the COVID pandemic, and with FY21 less than a month away, they should not only focus on their tax planning, but also be aware of the scrutiny. and Australia’s data matching programs. Tax office according to tax and business expert Ben Johnston of Johnston Advisory.
Mr. Johnston explains, “With tax time looming, it is imperative that small business owners take the time, despite their busy schedules, to plan for the year-end actions they may need. take to reduce their tax payable.
“As governments do all they can to encourage business growth, SMEs, including entrepreneurs, need to carefully consider their options.”
The lowering of the tax rate to 25% effective July 1, 2021 is a big change that has an impact on small businesses.
Mr. Johnston cautions: “While this sounds good for businesses, many small business owners who pay themselves dividends will have to personally pay higher taxes because they will have to pay additional taxes. It’s the difference between their marginal rate and the small business tax rate. It will attract people both this year and in the future. “
Mr. Johnston details his top 5 tips for small businesses before tax time:
- Make sure that all retirement pensions for you and your staff are paid by June 30. You can only claim the retirement pension as a deduction once it has been paid, so if you want to claim it in fiscal year 2021, you have to pay in the next few weeks.
- Write off any bad debts you have on your debt list. If you are sure you will not get paid and it is not profitable to sue, write off the bad debt before or by June 30 to ensure you claim the deduction in the year 2021.
- Use instant write-off of assets. If you need vehicles, machinery, office equipment, or tools, purchase them before June 30 to claim the full cost of the asset in fiscal 2021.
- Prepay expenses such as insurance and business subscriptions to anticipate the deduction and be able to claim them in the 2021 tax return.
- Plan ahead for the next fiscal year. Before this fiscal year is over, now is a great time to review your business structure and potentially take advantage of any income splitting opportunities you may be missing out on. This is also a great time to review your budgets and plan your expenses so you can manage your business’ cash flow and your tax obligations for the next fiscal year.
ATO has announced an audit initiative and data matching programs that focus on both small businesses and the black economy.
“If you think they’re poles apart in terms of ATO concentration, you have to think again. In fact, if you own a car worth over $ 10,000 in your company name, the ATO has you in its sights and that’s something that will be a game-changer when it comes to approach. big brothers and the sophisticated way the government undertakes audits. “said Mr. Johnston.
Tips to help you avoid ATO scrutiny and meet your motor vehicle’s FBT obligations:
- Always report all income earned by your business, including cash sales.
- Have your staff keep a logbook to record business trips in work vehicles.
- Develop a workplace policy regarding the private use of company vehicles.
- Register your business for social benefits tax if you own a company vehicle or provide a work vehicle to an employee and / or associates.
- House and pay your FBT obligations on time with the ATO.
- Consider paying your employees a car allowance rather than providing them with a company-owned vehicle.
- Ensure all tax invoices / receipts are kept on file for vehicle related costs.
- Consider applying the employee contribution method for automobile benefits, where employees contribute to the private use of their vehicle. It’s a great way to reduce your business’s FBT exposure.