If you sort your finances well you can pay less tax.
If you sort your finances well you can pay less tax.
What is it that makes a small business owner want to minimise their tax?
Usually it's because when they get to the end of each financial year, file and pay their tax returns, they see how much they've paid in tax, wonder whether they've got it right -- and thenrealise it's time to start on a new financial year.
Many use this time of a year to re-evaluate their systems and ensure that the advice they receive on tax is the best available within the laws of the income tax and GST act.
We're now approaching the end of the financial year and it's worth noting that there are ways to minimise your tax bill while still paying your fair share.
The key is making sure your accountant has all the right information.
Talk to your accountant before the end of the financial year, complete their checklists and ask questions about what more, if anything, you can claim or should know about and what records you need to keep.
Stock and bad debt write-offs should be done before the end of the financial year and don't forget to diary a reminder to do a proper stocktake at March 31, that is unless your stock levels are under $10,000 then you don't need to worry about providing stock information.
Review your debtors to see which ones aren't going to pay, because by writing them off you don't have to pay tax on money you have not and are not going to receive. They have to be written off completely to count and you need to have evidence of pursuing the debt.
Reviewing your employee's leave entitlements now might mean you can encourage or negotiate some leave with them just after balance date -- you may get a tax deduction for it.
If they take leave after 63 days of your balance date (between April 1 and June 2) then you can claim this amount in your March 31, 2015, financial statements. This applies to other types of leave such as long service leave and bonus payments.
The fixed assets you use in your business are kept in a register in your financials and sometimes surprisingly this part of the financial statements can be full of non-existent treasures. Computers and vehicles long gone, equipment and tools lost or broken -- review your asset list to make sure it's up-to-date.
Finally, if you're still a receipts-in-a-shoebox type person then move to accounting software, you'll be surprised at how much easier this time of year will be next time.
Jeremy Tauri is an associate at Plus Chartered Accountants.
