We blogged before about being ready for tax time. Well, here we are, staring down the barrel of the financial year end!
What are the things you can do right now to minimise tax and save yourself some money?
There are two ways to look at this:
- Doing Last Minute Stuff to Prepare for this Year End
- Preparing for the Next Financial Year
Last Minute Stuff – 7 Tax Saving Tips
- Go through your debtors (people who owe you money). If you’re sure they are a bad debt and will never pay you, write them off now. This removes income and will reduce your tax bill.
- Get ready to count your stock at 31 March if you think you have more than $5,000 in value – this could go either way in terms of savings – but it is a legal requirement.
- Go through your list of assets (fixed asset register) and make sure that you have, and are using, every asset listed. It often happens that you have old stuff on there that is long gone. Write it off now and take the tax deduction. And make sure you include this in the information to your accountant at year end.
- Make sure that you are carefully recording all your creditors (people that you owe money to). Recording all your liabilities accurately can reduce your tax bill.
- Think about asset purchases pre year end. This doesn’t make an enormous difference to your profit and subsequent tax as you can only claim one month’s depreciation – but if you were planning on buying something anyway, you may as well take that extra month into the year.
- Is your vehicle logbook up to date? Without a logbook determining your business/private use, you are restricted to 25% claim for expenses which can make a big difference at year end.
- Get a good accountant that will help with your tax planning at tax time.
Preparing for Next Year – 4 Business Improvement Tips!
- Get a good accountant. You may think that this is a self serving tip repeated – but actually tax planning is much better done at the start of the year than the end and it can make a substantial difference to your tax bill come tax time. Do not underestimate the difference to your overall tax position that an accountant can deliver. For example, a plumber who works as a sole trader with his wife who keeps the books and answers the phone and makes a profit of $90,000 would pay tax of $20,620. If he operated out of a company with his wife as a shareholder, this could be reduced to $16,940.
- Get a decent accounting system like Xero. The year end is an ideal time to switch to a good online accounting system. It will save you money, time and can help you run your business better. You will be amazed how easy it is and wonder why you left it so long!
- Check that you need all the entities and tax structures that you have. The beginning of a new year is a great time to consider whether you need 2 companies and 3 trusts, maybe you don’t. Discuss with your professional advisors and shut down any that you don’t need. Although there is some short term cost to close things down, it is well worth it to stop ongoing compliance cost.
- Think about re-pricing your products or services. Do a competitive analysis and see what everyone else is charging. You may decide to hold your prices but it’s always a good idea to check in annually.
Preparing for Next Year – 3 MORE Business Improvement Tips!
- Think about new software and whether you can automate anything to save money. There is new business software emerging constantly – talk to people, look online and see what might be helpful for you.
- Survey your customers! Always good to check in on the most important people in your business. Ask them how they’re doing, what they like and what they don’t like. Survey monkey is a great tool for this.
- Prepare a budget for the next year – evaluate what you achieved in 2019 and where do you want to go for the next year.