Prolonged effects of the pandemic have ripped through small businesses’ cash reserves, and with June 30 fast approaching, business owners need to start their tax planning now to set a solid foundation for the new financial year, warns Roger Mendelson, Executive Chairman of Prushka Fast Debt Recovery.
Support payments may have tax implications
From snap lockdowns, to JobKeeper, to temporary relief payments for businesses, there has been a multitude of changes that may impact business tax planning processes. In an uneasy environment, this year’s tax time is more important than ever.
Mendelson is urging businesses to preserve as much cash as they can through all accessible avenues.
“So many businesses have experienced reduced profits due to the pandemic, however JobKeeper would have boosted this profit. This profit is still taxable, so when the tax bill arrives cash is likely to be very tight,” Mendelson said.
“For Victorian businesses who have been doing it tough with the recent snap lockdown, it’s crucial to check your eligibility for the Circuit Breaker Business Support Package. Businesses will be able to apply for up to $5,000 in grants in sectors most impacted, however, to be eligible for this package there’s a minimum earning threshold of $75,000.”
Preserve your cash reserves ahead of tax time
“Cash is king for SMEs and unfortunately many small businesses won’t meet this requirement, so it’s important to explore all options to divert revenue and bring forward expenses into the pre-30 period, said Mendelson.
According to Mendelsen a big win for business owners last year was the extension of the instant asset write-off scheme. The scheme was extended in the May budget, so his means that business owners can claim the full value of all new eligible depreciable assets first used or installed by 2023.
Take advantage of instant asset write-off this tax time
However, Mendelson is advising business owners to take full advantage of this scheme before June 30 this year to capitalise fully and ensure taxable profits can be further lowered. Mr Mendelson offers some additional simple steps for small business owners this tax time.
“There are many other simple ways to get ahead before tax time. Write off invoices older than four months and don’t worry if they get paid later. This will avoid you having to pay GST on invoices you haven’t been able to recover, and make sure you’re not paying tax on income you haven’t received yet.
What can you write off ahead of EOFY?
“Another way to reduce your taxable profits is to write off any stock laying around that you haven’t been able to sell. Also, if your business has strong cash reserves, you could talk to your landlord about prepaying rent to bring your taxable income down.”
“You’re able to claim a deduction for the decline in value of depreciating assets, so it’s important to review your depreciation register.”
Mendelson suggests business owners adopt these simple, cohesive, and cost-effective strategies to improve tax processes.
“Operating in an uneasy and unpredictable environment calls for SME owners to be proactive and ensure they are putting their best foot forward entering the new financial year.”
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