Tax is one of those things that can easily make business management a little more complicated, especially when starting out. Although integral to your future decision-making, getting into the nitty-gritty of your finances is no joke. It’s part of the reason why every business owner is encouraged to invest in an excellent accounting service.

Aside from the usual help with tax planning, bookkeeping, and the financial processes, accountants can also give you some inside tips to reduce your company’s expenses via tax deductions. Straightening out your business tax can be quite the task, so having that solution by your side can be quite helpful to your operations.

Here’s a sneak peek of the various tax deductions small businesses can make:

Equipment

The ATO currently allows small businesses to claim for equipment purchases and be able to write them off in one go, rather than over a specific period of time. This often increases expense deductions quite significantly. Consider whether you can bring forward any asset purchases, to enable you to maximise your deductions. 

However as with any large purchase, make sure that you are watching your cash flow. It is not worth buying items just for the sake of a tax deduction if it will reduce your flow of cash through the business and hence affect your ability to meet other payment obligations.

The equipment purchased must be installed and ready for use in the business between 6 October 2020 and 30 June 2022.

Business Supplies

Your business likely utilises all sorts of supplies. Whether this is direct costs and purchases to make a sale of goods or services, or whether it is more ‘back-office’ use for the business such as software or admin assistance to get the marketing done.

As long as expenses are actually paid for by the end of the year, they may be claimed as a tax deduction.

Advance Payments For 12 Months Or Less

As a small business you may pay for some annual expenses up-front, such as insurance or subscriptions. The ATO will allow you to claim for the full cost of this in your tax return, rather than just allowing the proportion that relates to the financial year.

However, if the length of the contract exceeds 12 months, you will not be able to claim it all. Check with your accountant whether this could be an option for you.

Superannuation

Superannuation is a cost of employment, to put towards an employee’s retirement. As long as the superannuation is paid and acknowledged with the relevant super fund by the end of the financial year, it can be claimed as a tax deduction.

There is a $25,000 limit that can be contributed into an individual’s fund and for which a tax deduction can be claimed; make sure that this is not exceeded or additional tax may become payable.

Conclusion

There are a few more specific ways on how small businesses can access tax deductions. Having an experienced accountant can be vital in minimizing your company expenses and working to a better budget.

Looking for accountants in the Sydney CBD area? Your Accounting Sanctuary hopes to become a long-term accounting partner with businesses that want to build partnerships. Book a chat with us today!