With the end of financial year nearly here, there are a few things you can do to get ready.
This is the time of the year during which you should implement your tax planning initiatives for the current year and plan your business goals for the upcoming year.
We've put together a list of things you should think about -
Super contributions - timing the payments
Your business can only claim a tax deduction in the financial year in which the super fund actually receives your payment.
What this means is that is that if the super funds receives the April to June 2015 super contributions in July 2015 you will only be able to claim the tax deductions in the June 2016 tax year. You can bring forward your tax benefit by paying the super early.
TIP - if cashflow allows and you're are making profits, ensure you make the April - June 2015 super payments on or before 25th June 2015 to bring your tax deduction forward.
Maximise your super benefit
It is widely recognised that it is beneficial from a tax perspective putting money into super as you are taxed at 15% rather than 45% when on the maximum marginal individual tax rate.
So if you have not contributed the maximum amount into super for the current financial year it is worth considering the benefits of doing so. For the June 2015 year end the concessional contribution cap for those under 50 is $30,000.
TIP - extra super can be contributed through salary sacrifice.
Obtain specialist advice to consider whether it is appropriate to prepay any interest if you can to bring forward tax deductions into the current year.
Research & development Tax Incentive
Have you considered whether you are entitled to the 43.5% R&D tax incentives if your turnover is under $20m. The program provides a tax offset to encourage companies to engage in R&D that benefits Australia. To be eligible you must be engaging in eligible activities. There are certain requirements and deadlines, for example you must register within 10 months of the end of the financial year and must have a R&D plan documented.
To find out if you are eligible contact us and we can put you in touch with a specialist or have a look at https://www.ato.gov.au/Business/Research-and-development-tax-incentive/Eligibility/Eligible-activities/
TIP - check whether you have any elibile activities
A budget is one of the most important documents for a small business. It is evidence that you have planned out the future for your business and translated those plans into real financial outcomes. It represents the roadmap for you to achieve your goals. Without a budget your business won't be as successful. A budget also allows you to gauge whether you are on track to achieve your goals, make you accountable and measure when you actually achieve them.
A properly prepared budget will also predict future cash positions and can highlight whether the business will have cashflow problems. This allows business owners to address problems before they become critical to survival.
Xero has reports or tools which facilitate the preparation of a budget and input of the budget
TIP - Prepare your budget 1 to 2 months before the year starts, and use Xero to prepare and report on your budget.
Depending on when you normal insurance period expires, it is normally a good idea to consider the level of coverage you have across the different risk areas of your business during the budget preparation stage. This is the time when you are looking at the business as a whole from a top down perspective, so it is important to consider whether the business that you are heavily investing your time into is adequately covered.
TIP - renew and increase your insurance
PAYG income tax instalment
You might have paid some PAYG income tax instalments during the year which counts towards your business income tax for the current year.
Something to be aware of though - is that if you have varied the instalment amount down during the year and you end up paying less than 85% of the actual tax that you should have paid, you may be liable to pay the general interest charge.
TIP - calculate your estimated tax liability and confirm you are not exposed to being charged the general interest charge