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Most Effective Tax Planning Strategies for Businesses

April 27, 2021

OUR TOP 10 MOST EFFECTIVE BUSINESS TAX PLANNING STRATEGIES

The end of the 2020/21 financial year is almost here and now is the time to review what strategies you can use to most effectively minimise your businesses tax. After the year that was many businesses are continuing to rebuild their cash balances so it is important to ensure that you are paying the correct tax (and not a cent more) through effective tax planning.

#1 | Concessional Superannuation Cap

The concessional superannuation cap for 2021 is $25,000. Note that employer super guarantee contributions are included in these caps. Business owners can ‘top-up’ their super to this cap in order to claim a tax deduction against business income. Where a contribution is made that exceeds these limits, the excess is taxed to the fund member’s account at an effective rate of 46.5%. In order to claim a tax deduction in the 2021 financial year, the super fund must receive the contribution by 30 June 2021.

#2 | Asset Depreciation

The government had introduced a temporary instant asset write off until 30 June 2022. If your business has a turnover less than $50 million, then from the 6th of October you are entitled to claim a deduction for the business portion of the cost of eligible new and second-hand assets in the year that it is purchased and installed. Whilst we don’t encourage spending for the sake of claiming a tax deduction, if there is a need in your business for new equipment, the timing is right to make a purchase.

#4 | Prepaying common expenses

While you never want to buy something you don’t need, in order to save tax – if there are genuine expenses that you need to make – you can pay costs early to help cash in on the tax deduction this year instead of next year. These include costs such as lease, subscriptions, accounting fees and interest.

#5 | Motor Vehicle Log Book

Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2021. Without a log book, business owners can’t claim the logbook method (and are left to claim the cents pre kilometer method) so they may be missing out on thousands in tax savings.

 #6 | Investment Property Depreciation

If you own a rental property and haven’t already done so, arrange for the preparation of a Property Depreciation Report to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property.

#7 | Write-off Bad Debts

Review your Trade Debtors listing and write off all Bad Debts BEFORE 30 June 2021. Prepare a minute of a Directors’ meeting, listing each Bad Debt, as evidence that these amounts were actually written off prior to year-end.

#8 | Carry Back Tax Losses

Review your Trade Debtors listing and write off all Bad Debts BEFORE 30 June 2021. Prepare a minute of a Directors’ meeting, listing each Bad Debt, as evidence that these amounts were actually written off prior to year-end.

#9 | Review your Trading Structure

Your choice of structure will depend on the size and type of business and how you want to run it. Each structure may have an impact on key areas such as tax you’re liable to pay, asset protection and costs to set up and run. There are a number of structures that you can choose and strategies to maximise asset protection while legally reducing tax.

#10 | Trustee Resolutions

Ensure that the Trustee Resolutions are prepared and signed BEFORE 30 June 2021 for all Discretionary (“Family”) Trusts to avoid the ATO taxing your trust at 47%. Please see us for more information about these resolutions.

Talk to us TODAY before the 30 June 2021 deadline for assistance to reduce your tax or complete our Free Tax Scorecard

At Eclipse Accounting Group, we’re about so much more than just numbers.

We’re invested in the good of our clients, our team and our families, and we strive to make a difference in the wider world.

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