Are you prepared for tax time?

Here we go again! Make this the year that you really get yourself organised to minimise tax and save some money.

Here are tips for each that could make a difference to your tax bill.

Last Minute Stuff

Get a good accountant – it’s not too late!

Accountants help make sense of your finances and prepare your accounts and tax returns. You’ll want to ensure you are paying the right amount of tax, have an idea of the size of your bill and when you need to pay it, as early as possible.

If you’re concerned about fees for accounting services, here are two tips:

  • The easier it is to find and interpret your financial information, the cheaper your accounting bill will be. This is another reason to get a good system in place.
  • Ask your prospective accountant for a fixed price quote so there are no nasty surprises (we only work on fixed fees).

Do not underestimate the difference to your overall tax position that an accountant can deliver!

Debtors

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.

You don’t want to pay tax on income you’re unlikely to receive.

Fixed assets

Go through your list of assets (fixed asset register) and make sure that you have, and are using, every asset listed. Pay particular attention to electronic devices which you may have since upgraded.

You’ll probably find items that are no longer used, have been thrown away, stolen, or sold, or traded in for an upgrade.

Write them off now and take the tax deduction.

Creditors

Make sure that you are carefully recording all your creditors (people the business owes money to).

Recording all liabilities accurately can reduce your tax bill.

Vehicle logbook

Is your vehicle logbook up to date – recording all business and personal kilometres for at least 90 days? 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.

The information from the logbook can be used for up to three years provided there are no significant changes in the vehicle’s use.

Prepare for next year 

Bookkeeper

Think seriously about using a bookkeeper. If you’re not confident about what goes where, or are as time-poor as most business people, then a bookkeeper can help input information into your system correctly. You may be surprised how little it can cost – what takes you four hours may take a bookkeeper only two. It will certainly free up your time to do something more enjoyable. Do some research online or ask your colleagues/mates – there is no shortage of good people out there.

Beany offers this service at $55 plus GST per hour.

Accounting Software

Using an accounting software package that does what you need is vital to businesses. If you haven’t updated for a while, or are new to business, you’ll be astonished at what’s available these days. The start of a new year is the perfect time to switch to Xero (or other accounting software). Almost all of our clients use Xero. Select a Xero pricing plan that works best for you (you can easily upgrade or downgrade later if needed).

The Xero Cashbook or Xero Ledger (available only through accountants) may be perfect if you don’t need all the bells and whistles.

Business and tax structures

Do you need all those entities and tax structures? Maybe you need two companies and three trusts – maybe you don’t.

Are you aware of recent changes in Trust legislation from January 2021? There are increased obligations for trustees, additional disclosure of information to beneficiaries, and cost implications. We suggest you have a chat with your professional advisors.

Although there are shortterm costs to close these down, it is well worth it to stop ongoing compliance costs.

Re-pricing

Think about re-pricing your products or services. Do a competitive analysis and see what everyone else is charging.

Even if you decide to hold your prices, it’s a valuable exercise – what you find may surprise you!

Business software

New or upgraded business software seems to be available every day – is there anything you can automate to save time and money? Can your apps be integrated into your accounting system, or with each other?

Colleagues and friends may provide useful nuggets of information.

Survey your customers

It’s 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. Make sure you’re on the right track.

Keep things simple

Business can get complicated and when it does, accounting records and systems often follow suit.

  • Avoid burdening yourself with multiple companies, trusts, and structures. They are rarely worth the hassle.
  • Only use multiple codes for different items if the different codes genuinely help you run your business. Sometimes more information leads to poorer decision-making or less business agility.
  • Set up a system for recording your business income and expenses directly, in one place.  Some businesses keep paper invoices, which they then enter into a spreadsheet, which then gets sent to an accountant, who inputs it into their accounting software. If this works for you and your accountant, that’s fine, but there are more efficient ways of doing this.

If you’re adding complexity – which will, inevitably, add cost – then make sure you’re getting a good return. Sometimes it’s worth it, sometimes it’s not.

Go digital

Digitise all important paper documents and save them, along with your relevant electronic documents, in an orderly way. Key documents to save include:

  • Fixed asset invoices or large repair bills over $1,000
  • Business insurance documents
  • All new loan and lease agreements
  • All sale and purchase agreements
  • Any legal bills
  • Year-end bank, credit card and loan statements

Ideally, you’d save them to your accounting system, but there are alternative solutions, such as Google Drive. Whatever you choose, aim for a solution that is easy to use and secure, yet shareable.

It’s also helpful if you add detailed descriptions on the transactions – your accountant will appreciate it!

If you’re unsure about how to implement any of these tips or want to talk them through with someone, contact us at support@beany.com

 

 

 

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