There was no adequate relief for Australia’s small business sector in the recent federal budget. But it did make changes to tax rules and superannuation contributions, and small businesses should take note before the end of the financial year.
This ten-point checklist from national sales director at Bibby Financial Services Gary Green outlines how businesses can review their tax position and set up strategies for the new financial year.
1) Tax benefits for small business
Businesses with a turnover less than $2 million will be eligible for certain tax concessions. Changes to depreciation rules from July 1 include the instant asset write-off threshold, which will increase to $6500 from $1000.
It’s a good idea to regularly check if your business is eligible for this or any other small business tax concessions so you can gain the benefits.
2) Change in employer super contributions
The compulsory Superannuation Guarantee will increase from 9 per cent to 9.25 per cent from July 1. The current age limit will no longer apply, meaning employers must take payments for employees who are 70 years or older.
Make sure your payroll systems accommodate these changes.
3) Don’t wait for unpaid invoices
Dun & Bradstreet’s latest Trade Payments Analysis (TPA) showed businesses are waiting up to 55 days on average to receive payment on invoices.
If you’re still chasing invoices from the last financial year, now is the time to write them off. Bad debts are tax deductible and can be used to offset your taxable income.
4) Bring forward expenses
Bring forward some business expenses into this financial year if you can. These can be used as deductions and help offset your taxable income, potentially reducing your tax bill in 2012-13.
But be aware that no deduction for an expense is allowed for this year if payment is made after June 30.
5) Medical Expenses Tax Offset
The federal budget announced that the Medical Expenses Tax Offset will be phased out, so if you have spent over $2000 on medical expenses now is the time to claim it. Disability or aged care expenses can be claimed until 2019.
6) Lodge your documents on time
Get your tax documents in on time to avoid a fine called failure to lodge on time (FLT) penalty.
This may be applied when you are required to lodge a return, statement or other document such as a Business Activity Statement with the ATO by a particular date.
7) Get your business in order
Administration can be tedious but doing it regularly will help you at the end of the financial year. To help organise your documents are records, think about investing in electronic accounting software.
This will reduce errors and free up your time to concentrate on growing your business instead of doing paper work.
8) Need a new lender?
If cash flow is an issue, look into alternative forms of financing. Debtor finance, also known as factoring, can pay up to 85 per cent of outstanding invoices usually within 24 hours and follow up the debtor for you.
According to the Debtor and Invoice Finance Association (DIFA) total debtor finance turnover was up by 2.1 per cent in the March quarter from last year, outpacing business credit.
If everyone else is doing it, why aren’t you?
9) Don’t rush your return
Don’t leave your tax return to the last minute. Start it now so you can get a more accurate picture of the health of your business ahead in the next financial year. Make sure you have all the relevant transactional records on hand needed to complete
your return so you can hand them to your accountant.
If you don’t have receipts to back up your expenses, then you can’t claim them as deductions.
10) Consider a revitalised market strategy
Review the progress of you business and marketing strategy in the new financial year. Consider dabbling in social media to increase engagement with your target audiences or listen to the conversations they are having on Twitter, Facebook or LinkedIn.
Use it to raise brand awareness and source new customers, generate new sales or provide networking opportunities to grow business.
It’s time to get on board.