15 Tax Planning Tips For The Self-Employed That You May Be Able To Utilise This Financial Year!

The end of the financial year is almost upon us and that means that now is the time to consider some pro-active tax planning to assist you in minimising your tax liability for this financial year.

We’ve put together a list of 15 tips that you may be able to utilise to help you save a few dollars or “kick the can” into next financial year.

Successful business operators that we’ve worked with over the years always look to take advantage of deferring their taxes.  It enables them to use the Capital to grow their businesses. It’s the cheapest form of money available and you’d be crazy not to take advantage of the opportunities yourself!

We reckon the money is better in your pocket than in the ATO coffers!!

So here are the tips:

  1. Delay invoicing until next financial year.

If your cash flow allows it, delaying the issue of invoices until next financial year will keep that income out of this year’s figures and reduce your assessable profit.

2. Request your suppliers to issue invoices prior to the 30th.

Ask suppliers to issue you with their invoices ahead of schedule so that these can be expensed this financial year.  You may even get the expense without having to pay for it this financial year!

3. Stock up on inventory.

If you have the cash flow and are confident in being able to move the inventory in the next financial year, now is an ideal to go on a shopping spree. Bargains may be around as your suppliers look to clear stock prior to the end of the financial year or provide you with a discount with a large purchase.

Once again, you may not need to pay for this purchase until next financial year if your suppliers will afford you terms.

4. Review Trading stock valuation methods.

There are several methods available for valuing trading stock. A change in method may result in a larger expense this financial year.  Get on the phone and have a chat with your beancounter…they’ll be able to talk you through your options and the impact.

5. Write off obsolete stock

Now is a perfect time to write off that stock that has been sitting on the shelves gathering dust or is damaged.  Writing it off doesn’t mean that you still can’t sell it in the future.

6. Sell or write off assets that are no longer productive to your business.

Review your current asset list and see what items you may be able to trade, sell or write off. Ascertain what the written down value may be and then look at structuring the sale to crystallise a loss in this financial year.

7. Take advantage of the immediate $20,000.00 tax write off associated with the purchase of Capital Equipment up to a value of $20,000.00.

This is a fantastic incentive that is currently on offer by the ATO.  It’s scheduled to finalise on the 30th June 2017, although it may yet be extended.  I wouldn’t take the risk however and would suggest that if you’re looking to either upgrade or acquire new equipment to benefit your business, then move on this one asap.

Used in conjunction with Tip 6 it can result in some pretty amazing deductions this financial year with the outlay of little or no cash.

Read the following article if you would like to know more about this incentive and how it works.

8. Purchase assets using a Finance Lease and upfront the payment.

The finance lease has fallen out of favour when it comes to financing Capital Equipment since Chattel Mortgage financing allows the borrower to immediate claim back the GST.

A Finance Lease still has its distinct advantages, these being the following:

  • Ability to structure payments
  • Providing greater tax deductions for low depreciating assets

We often structure contracts at this time of the year with large upfront payments, which results in immediate deductions for the borrower. Often these payments represent up to 12 months’ of monthly repayments.

If you have spare cash or cash from an asset sale, this is an excellent option to consider.

If you’d like to know whether it can work for you, contact us and we’ll crunch the numbers for you.

9. Pre-pay certain expenses

There are certain set expenses that you may be able to pay 12 months in advance such as the following:

  •  Insurances
  •  Interest
  •  Rates
  •  Professional fees
  •  Rent

You may be able to pre-pay almost any recurring expense that you have. You will need the cash to do this, however if you can afford it, it comes straight off the bottom line.

10. Repairs and maintenance

Bring forward any scheduled R & M that you may have to make on your Assets or business premises.

11. Write off Bad Debts

Once again, good time to do it. Remember that you’ll need to document the process correctly and if payment is received in the future you’ll have to bring it to account.

12. Determine Employee bonuses

You’ll have to make a record of commitment to pay these bonuses, however it doesn’t actually have to be paid this financial year.

13. Pay employee’s super contributions

The SGC for the last quarter is usually payable on the 28th July of the next financial year.  If you bring the payment forward and pay it prior to the 30th June you’ll be able to claim it this year.

14. Maximise Directors Super Contributions

If you can afford it, now is the ideal time to pay the maximum amount allowable into your Superannuation. Check with your accountant or planner what your situation and limits may be.  If you don’t have a planner, we know a few good ones that can help you out.

15. Maximise Directors wages

You may be able to pay yourself or family members a bit more PAYG income resulting in an overall lower tax payment. Take advantages of the differences in the personal rates compared to the company rates.

Now get moving as the clock is ticking!

Hopefully the above provides you with something to think about prior to the end of financial year. Although I’m a qualified CPA, I don’t practice as a tax specialist, so it’s vitally important that you discuss the above options with your tax accountant or financial planner. They’ll be able to provide you with up to date information on your options.

If you have any queries about the financing options mentioned, please do not hesitate to contact us   07-5554 5221.

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ShayneArticle by Shayne Fergus, Capital Funding Group

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