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5 tips for…Getting on top of your taxes

With the end of the Financial Year fast approaching, now is a great time to look at your taxes. Here are my top tips to help you reap the rewards now, and down the track.

 

1) Consider tax deductible super contributions

Tax deductible super contributions could allow you to contribute up to $25,000 into superannuation before the 30th of June, so we strongly suggest you talk to a financial planner about this within the next few weeks, particularly when you consider the financial penalties for going over. For example, if you pay tax in the highest marginal tax bracket of 45%, you could receive a 30% benefit as contributions to super are taxed at 15%.

 

2) Prepay and prepare for expenses

If you’re looking to reduce your taxable income, then prepaying for certain expenses for the year ahead can be a great financial strategy. Interest and insurance are among the expenses you can prepay for.

Furthermore, if you’re planning to purchase any new equipment including things like stationary and uniforms, you can bring these expenses forward and lock in the tax deduction earlier – organisation at its best!

 

3) Defer or bring forward income

Bring forward my income, you ask? That’s weird when we talk about tax planning and reducing tax, right? Wrong! Tax planning takes into account the future plans for the business. For example, if you’ve had a quieter year compared to previous years, but you’re confident things are likely to fire back up, you can bring forward your income into this Financial Year to help reduce next year’s tax.

On the other side, if this year has been large (and we hope it has!) you can look at deferring some of your income until after June 30th.

 

4) Get your trust distributions right

Trust distribution resolutions must be made before the 30th June, and we strongly suggest you address this – seriously, it’s in your business’ best interest!

Trust distribution determines which beneficiaries will receive distributions and what portion of trust income they receive. Getting this right can save you thousands of dollars in unnecessary tax bills. Getting this wrong or not doing it at all can mean paying tax at 45%. Let’s be honest, no one wants to hand almost half of their hard-earned money to the tax person! If you don’t have a trust involved in your structure, now is the time to discuss this with your accountant.

 

5) Just started a business? Deduct professional advice fees

Professional expenses associated with starting a new business, such as legal and accounting fees, are now deductible in the Financial Year the expenses are incurred. This was previously deductible over a five-year period – so it’s a good opportunity to look into this now! If you established a business during the Financial Year 17/18, you should speak to your accountant about claiming professional advice fees as an expense.

These tips are a starting point for you to consider ahead of the end of the Financial Year, but there are plenty of other strategies we recommend you take into account, from simply keeping all your work related receipts for expenses to being smart about your business’ assets by doing an accurate stock take and writing off obsolete stock.

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Jason Robinson is a Director at RBK Advisory (www.bkadvisory.com.au), a fast-growing accountancy headquartered in Melbourne.