With the end of the financial year approaching, now is a prime time to start preparing for your business tax return. Planning for the end of financial year is usually commenced in March as it gives you time to organise yourself and create appropriate tax plans to implement before you have to lodge your returns.
Tax planning is vital in order to create a profitable business. Superannuation contributions, structured salaries, debts and investments can all potentially save you money on tax payments. Some of the following actions could be of use in helping you to reduce your business tax liability for the 2011 financial year.
How to Prepare
Ensure that you meet both mandatory and maximum superannuation contribution criteria:
In order to be claimed as a deduction in the current tax year, employer contribution payment/s must be made prior to 30 June. By contributing up to the annual “age-based limits” you can reduce your business’s taxable income and potentially gain at least a 30% deduction.
Utilise prepaid expenditure options:
If your business is eligible then you may be entitled to pre-pay expenditure on items such as rent, insurance premiums or advertising, for up to 12 months and claim these payments as an immediate deduction.
Realise capital losses to reduce capital gains tax:
To save on capital gains tax (CGT) and free up money for more suitable investments, you could consider selling poor performing assets that no longer suit your circumstances. Doing this allows you to use the capital loss you have incurred to offset a capital gain from another asset in the same financial year.
If you believe that you will be in the same or lower tax bracket next year, you should consider deferring some income until the following year. You could save yourself from being pushed into a higher income tax bracket and getting hit with a bigger tax bill.
Tax planning can be a very complicated process due to the variety of factors that all need to be taken into account, as they contribute to the amount of tax you are liable to pay. It’s important to seek professional advice when it comes to structuring your investments and superannuation, as well as various other factors such as those outlined above, in order to maximise your after tax income.
If you are a business owner or company director speak to us today about the best way to legally reduce your 2011 taxation liability. For more information submit an online enquiry or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to begin creating your business’s tax plan.