All businesses small and large need to spend time looking at their tax liability. They need to form a tax strategy that can and should be implemented at the beginning of each year, whether you are on a calendar year or a fiscal year. There are changes almost every year in tax laws, credits and options that may be available to you. A little planning and a good strategy can improve your chances of not having that huge tax bill at the end of your year. Waiting till the end of the year to find out what you owe, will leave you no time to correct or reduce your tax liability. Planning ahead and scheduling a good tax strategy will help you have better knowledge of what type of tax liability you may incur during the year. A good accounting program that allows you to do account reconciliations will also make the planning and implementing of a tax strategy easier.
Get Professional Advice
- If you do not have a CPA Accountant Sydney or Tax advisor there are many choices to you from a local CPA firm to online services, such as e-tax that you can download from Australian Taxation Office website. It is important to have a professional that can advise you. Meet with them quarterly for up to date changes in government tax rulings, deductions and changes to credits. They can also tell you of any tax credits or small business incentives that you may be eligible for. Many credits are over looked by business owners trying to do their own taxes. They can also offer advice as to what you can legally deduct and what you could implement to maximize your deductions. Check with them frequently and let them guide you, it will be time well spent. If you have not had an audit, it could beneficial to you to hire a CPA firm to perform one for you. The information you could gain and the mistakes that could be corrected would more than pay for the expense.
- Review income and expenses. Keeping track of where your gross profit and expenses are will give you time to reduce your taxable income.
- Check payroll and your payroll liabilities. If you are showing a gross profit that will leave you in a higher tax bracket you might think about bonuses or work incentive awards.
- Check your purchases for items that can be immediately expensed. Some office equipment, depending on the cost, can be expensed instead of depreciated.
- Look at your expenses, there are several that are easy to overlook.
Entertainment: Entertaining is a major part of client or customer relations, these expenses are tax deductible and will help growing your customer or client base.
Safety: Work place safety is a large concern for all companies and using safety classes and rewarding workers for achieving a safety milestone is deductible.
Education: Continuing professional education is tax deductible. Seminars, college courses and certifications can all be expensed.
Automotive: If you use your personal vehicle for business these expenses are tax deductible. Check with your tax advisor for the percentages.
- Fuel and oil
- Lease payments
- Depreciation ( owned vehicles)
- Repair and Maintenance
- Toll charges
- Vehicle registration fees
Home Office: If you do any work from home, set up a space to use as your office. There is a portion of your home expenses that can then be deducted. Your tax advisor will be able to tell you the percentages you can use.
- Property taxes
- Repairs and Maintenance
- Home insurance
- Review your assets and liabilities. Look at your assets for items that could benefit from or be eligible for accelerated depreciation.
- Check your inventory amounts for items that could be disposed of due to lack of sales, obsolescence or damage. Most of these can be immediately expensed.
- Check your cash flow, depending on the amount, you may want to purchase new equipment or expand your business.
- Either expense off bad debts, or look at the cost of debt collection. There may be times when going ahead and spending the money to try and collect a debt may beneficial, if a customer owes you more than the attorney’s and legal fees you will be able to expense that amount, and collect a percentage of what the customer owes. The remainder of the debt then can be written off as an expense. Accounts receivable should reflect current invoices.
- Accounts Payable should be reconciled and reflect current invoices only.
- Review your year-end Profit and Loss statements and plan out your next year’s strategy.
- Consult your tax advisor for any tax deferments you can take.
- Lodge your annual tax return (city tax accountants will be able to offer expert assistance with the tax return Sydney CBD).
Being a business owner can be difficult, but it doesn’t have to be impossible, with knowing where to look for answers is a step in the right direction. Having a good business plan for the future is crucial to any business. Implementing good accounting practices will help make that business plan achieve what it was meant to do, improve your business and make sure that your business grows. With growth comes the potential for higher tax brackets and larger tax debt at the end of the year, minimize the tax liability with these simple steps. The most important part of your business plan should be to have a qualified CPA or tax advisor that you can go to for all of your tax questions. A good tax advisor will be able to keep your company up to date on any changes in the tax laws. You want to increase your company’s growth but at the same time reduce your tax liability. Take the time to research your options and there is a help area in the Internal Revenue Service web site that has information available that may answer some of your questions. Knowing where you stand every month and planning ahead will make you a better business owner and will make your company more efficient. Having a tax planning strategy is just good business.