Small Business Tax Planning 2022
By Travis Bacon
January 09, 2022
While the end of the financial year might seem like a mile away, it is never too early to start planning for your tax. It is a good small business practice to start thinking about your tax liability as early as possible. Ultimately the goal is to maximise your benefits while ensuring you have enough cash flow to pay any taxes when they come due.
There are two golden rules when it comes to tax planning:
Don't let tax get in the way of a good business deal; and
Don't spend money on things that you don't need, just to get a tax deduction. You may find yourself paying $1 to ~30 cents in tax.
Tax Planning Strategies
Now that you have the two golden rules, let's take a look at some common tax planning strategies for small businesses. When it comes to tax planning, even implementing simple strategies can reap huge benefits at tax time.
Prepay some of your 2022-2023 expenses before 30 June. A business can deduct up to 12 months of the following year's expenses in the current year. (This includes rent, insurance, subscriptions, etc.)
Take advantage of accelerated depreciation measures which will allow an immediate deduction for the total cost of eligible assets. (Remember the golden rule - don't spend money on things you don't need just for a tax deduction).
Topping up your voluntary superannuation contributions up to $27,500 for the 2021/2022 financial year.
Review any bad debts and write off any unrecoverable amounts.
If appropriate, postpone invoicing some of your customers until the next financial year.
Maximising your home office and working from home deductions.
Consider restructuring inefficient business structures.
For businesses that make use of a discretionary trust to distribute income amongst beneficiaries, a trust distribution minute must be drafted before 30 June. ATO legislation dictates that trust income should be calculated prior to 30 June, and should the ATO request this documentation, a signed trust distribution minute will satisfy their requirements.
At TaxDigital, we prepare these trust minutes on behalf of our clients to ensure they are compliant with the ATO and avoid large penalties. If you want to prepare your own trust distribution minute, you can find a template on our resources page.
Tax Planning Strategy Meeting
The best tax planning strategy starts by talking to us. We will take the time to understand your current business, your overall goals and even what is holding you back, before we dive into tax savings. A typical tax planning strategy meeting with us will look like this:
We review all of your income and expenses and estimate your taxable income for the full year. This includes all your business income, investment income, capital gains, etc.
You get to have a one on one session with us and review the results. We will ensure you're claiming all possible deductions and discuss any tax saving strategies (distribution of income, depreciation, superannuation, loss carry back offsets, etc.)
We will provide you with a summary of your tax position that outlines the tax-saving strategies and details the amount of tax dollars you will save
You get a to-do list which makes putting things into action before 30 June straight forward.
How can TaxDigital help?
At TaxDigital, we assist small businesses with tax planning strategy sessions up to 30 June 2021, ensuring they have the necessary information and plan in place to maximise their tax savings. We recommend booking a session with us early as possible to ensure you have enough time to enact your tax saving plan and manage your cash flow effectively.
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek personalised tax advice from us at TaxDigital. Information is current at the date of issue and may change.
Get the latest industry and tax information from our small business blog.