Better Tax, Better Accounts & Better Prepared

Here are our best tips to prepare your businesses in 2022.

Year End Tips for Business

As an Accountant, I place a lot of emphasis on the numbers and knowing exactly where your business is at. Coming into the last quarter of the financial year is the perfect time to take stock of exactly where your business is at, where you would like it to be and have the numbers to make quality decisions about how we are going to get it there. It’s all about making plans early so that the business ends up in the most favourable position come tax time, not about processing the numbers after the fact, and having little control over the outcome.

Goal Setting for the future

The last quarter of the year is the perfect time to take stock of the business, know exactly where you are now, then make plans. Would you like your turnover to increase? Ask yourself what exactly needs to happen for this to occur? Breaking your goals down into small, achievable actions makes it more likely to happen then just deciding that you should double your turnover without any thought as to how that is going to happen. I often refer to the SMART (Specific, Measurable, Achievable, Relevant and Time Bound) metrics when goal setting to ensure that I build a clear pathway to achieve the goal. After your goals have been set, it’s important to schedule time in throughout the year to monitor them and make yourself accountable to upholding them. It is also important to be flexible with your goals, they are not set and forget. They need to be monitored to ensure that they are still relevant to your goals and working, some may need to be dropped, changed, or added to get you back on track.

Tax Planning

This is also the perfect time to look at tax planning for the end of the financial year. Once we know exactly what position you are in, we can begin to get a picture around what your year end could look like and start building scenario’s as to how we would like it to go. I generally have a plan in place with my clients well before this so that everything runs smoothly, however this is a great time to revaluate that plan and check that it is still what best fits their needs. Some of the options available to business right now to reduce their bill come year end are outlined below.

Temporary Full Expensing

This is probably one of the most heard about and talked about methods that business can use to reduce their tax bill. Eligible businesses can deduct the full amount of certain assets that they purchase and is ready for use prior to 30 June 2022. With the deadline for this rapidly approaching this could be the last time this measure is available for businesses to utilise and could potentially save you thousands at tax time.

Company Loss Carry-Back

This is another popular strategy for companies that have incurred a loss in their 2020, 2021 or 2022 tax returns. If the company paid tax in the 2019 or onward years and incurs a loss in the previously mentioned years it could be eligible to use this to create a refundable tax offset, providing a cash boost for your business.

Reviewing Debtors

Reviewing debtors is something that I encourage businesses to do often in addition to chasing up outstanding debtors. However sometimes things happen, and these debts are unrecoverable. If there is little or no likelihood of recovering these debts, we can consider writing them off and claiming a tax deducting or them. It’s important to note if circumstances change later, we can still pursue the debt.

Superannuation Contributions

There are several ways to maximise your tax return using superannuation depending on your circumstances. If you have employees consider paying their superannuation prior to 30 June to claim the deduction in this financial year. It may also be possible to make additional contributions to your own superannuation fund and claim the tax deduction for it, or it might be more beneficial for you to investigate the government co-contribution.

Stock and Inventory

Knowing the value of your stock on hand is essential for any business, however there can be tax deductions claimed if you identify obsolete or unusable stock and have it written off prior to year-end.

Farm Management Deposits

If you are a primary producer, investing into Farm Management Deposits could be very useful in reducing large fluctuations in your business. FMD’s can smooth out the tax burden for your business as well as earn you interest on your money.

Prepaying Expenses

Certain expenses can be prepaid in the current financial year to ensure the deduction can be claimed prior to 30 June. Things such as rent, insurance or subscriptions can be deducted in this financial year.

Additional Tips

The list of tax planning tips provided previously is certainly not exhaustive, there are many other things that can be used to help your business reduce their tax bill at year end. As an Accountant my goal at the end of the day is to make you wealthier, and this isn’t always done by minimising your tax bill. Paying a dollar to get a cent amount back in tax isn’t sensible if that purchase isn’t helping your business in some way. Also making some decisions, like fully expensing an asset upfront will mean that there is no future deduction available for the depreciation of that asset. I strive to make you aware of all the options available to you, and the impact that they will have on you not only today but also in the future. Therefore we tailor individual advice, specific for you, your goals and needs.