How Small Business Owners Can Pay Less Tax This Year in 2020?
Updated: Mar 3
Being a small business owner is expensive as it is -- every penny counts. Minimizing taxes may be the difference between a profitable business and one that is just scraping by.
You all are probably thinking, “I don’t have extra time do deal with taxes.” Thankfully, there are many tax savings strategies to reduce your taxable liability as a business owner. If you need ways to reduce your taxable income this year, consider some of the following methods below.
1. Utilize an accounting software
Let’s be real. Accounting software is a must for small business owners. It offers protection a small business owner may not be able to afford otherwise. It can help you prepare your financials online while backing up that filing with accuracy and maximum-refund guarantees.
Ditch the paper. If this sounds like too much work, hire a tax professional, and maybe a bookkeeper. Even with the best team of advisors, if you don’t have the right info about your expenses, you will pay more in taxes. All those small, missed deductions can really add up.
2. Defer income
Consider holding off sending customer invoices till July 1. You need to keep in mind how that might affect the next financial year, but if you were close to a tax bracket for this year, then it might be worth deferring enough income to stop you going into the next tax bracket.
"If you have a client that you know is never going to pay then make sure you write this off and account for it in your accounting before June 30."
3. Write off bad debt
If you have a client that you know is never going to pay then make sure you write this off and account for it in your accounting before June 30. This way you won’t be taxed on this income. You do need to show that you have made a genuine attempt to recover the money so make sure you keep records of emails, calls or letters sent in your files.
"The threshold has increased to $30,000, and has been extended to 30 June 2020."
Got a charity that you like? Why not donate? If making donations before 30 June, remember donations are only deductible to the not for profits with DGR Status.
5. Immediate Asset Write off has now increased to $30,000
The threshold has increased to $30,000, and has been extended to 30 June 2020. The instant asset write-off now also includes businesses with a turnover from $10 million to less than $50 million.
These businesses can claim a deduction of up to $30,000 for the business portion of each asset (new or second hand), purchased and first used or installed between 2 April 2019 and 30 June 2020. Businesses with a turnover of up to $10 million can also claim a deduction for each asset purchased and first used or installed ready for use, up to the following thresholds:
· $30,000, from 2 April 2019 until 30 June 2020
· $25,000, from 29 January 2019 until 2 April 2019
· $20,000, before 29 January 2019.
"..why not bring it forward a month and pay it before June 30 and that way you can claim it now rather than waiting a whole year."
6. Pay the June quarter superannuation
Superannuation is deductible when paid. The June quarter payment is due on the 28th July, so why not bring it forward a month and pay it before June 30 and that way you can claim it now rather than waiting a whole year.
7. Capital Gains Tax (CGT)
Minimizing CGT is imperative. If you have a capital gain, do you have another asset that is making a loss that you can sell to counter the improvement, or can you defer the exchange date? Do you qualify for any capital gain rollover concessions? If in doubt about how to handle this make sure you get some advice.
8. Use the superannuation cap
Putting money into your superannuation is a great way of reducing your tax bill. If you are wanting to increase your retirement plan then you should be contributing as much as you can into your super up to $25,000. Make sure you don’t exceed the super contribution caps.
Unsure On What Is The Best Strategy?
If you are unsure which strategy is more effective for your circumstances make sure you speak to one of our tax experts that can guide you to achieve the best outcome based on your current circumstances.
Need a second opinion on your financial situation? Get in touch for a obligation-free meeting and start your journey on financial freedom today.
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