For a COVID hit economy, the revival of small businesses is essential. The Australian small business sector is one of the major contributors to GDP and generates employment. However, with the current economic challenges, the road to recovery might be too bumpy. Therefore, it has become more important than ever for small businesses to optimise, streamline and manage cash flow this financial year.
One of the major reasons behind inefficient cash flow is poor tax planning. This can be one of the detrimental factors that eventually force many to close down their business. If you have just started taking baby steps in the world of business, it’s important that you have a proper strategy in place to optimise your tax planning and become compliant.
Here are some smart tax tips that will help your small business to become more tax compliant and manage the finances better during a tumultuous economic period:
Keep a Track of Finances For Efficient Management
The thumb rule to manage taxes better for any small business is to keep a track of the expenditure incurred against the income earned during the financial year. According to the Australian Taxation Office or ATO, you are required to keep a meticulous record of your business transactions for up to five years, including all expenses – right from assets to business travel.
Further, it is important that every small business owner maintains a proper record of their personal expenditure and keeps it separate from the business expenses. For example, if you use your personal vehicle for business purposes, it’s necessary to apportion expenses appropriately to avoid tax non-compliance.
Deadlines are Important – Never Miss It!
According to the guidelines set up by the ATO or Australian Taxation Office, for tax deduction for any financial year, an expense must be paid prior to 30th June. Let’s say for example, the immediate deduction for assets that cost less than $150,000 must be ready for use by 30th June, while superannuation must be paid before 30th June.
Don’t Forget Deduct Bad Debt
An unpaid debt is touted as “bad debts”. This type of debt can be considered as tax deduction for the business if it’s included in their assessable income in either current or previous financial year. There are a number of conditions that must be fulfilled for a debt to qualify and consider a bad debt.
Don’t Wait Until it’s Too Late
It’s true that there’s a lot to prepare before filing taxes, but that doesn’t mean you should not pay attention to the taxes for the rest of the year. The best way to avoid any missed opportunities is to prepare throughout the year. This will take the load off when it comes to file your tax returns. It could also help in figuring out which tax deductions you can claim well in advance as this might save money in the long run.
If you are a small business and have been struggling with your tax planning, call SMART Financial Advisory today.