Small Business Should ‘Accelerate to Depreciate’ for a New Tax Year Boost
9 June 2015
Deductible expenses can often mean the difference between a good year and a great year for small businesses, so business owners should ‘put the pedal to the metal’ on their tax preparations, according to Suncorp Bank.
Suncorp Bank Head of Business, Troy Constance, said business owners in particular who want to keep ahead of the game should be thinking now about purchasing assets that would make a difference to their business.
“The Federal Government’s proposal around asset depreciation deductions would allow small businesses (with turnover of less than $2 million) to immediately write off business assets worth $20,000 or less,” Mr Constance said.
“The measure is intended to provide a boost to small business and the economy.
“Although not yet through Parliament, savvy small business owners won’t want to wait before investigating the purchase of vehicles, equipment or machinery that will kick start business growth in the next financial year.
“We know tax time can feel like a burden to small business, but this is definitely the year to focus on it, because the small asset write-off provision will apply to the prior tax year as well as future ones.”
BMO Business Centre Accounting Partner, Michelle McVeigh, said the new rules offered a good opportunity for small businesses to grow their business asset base in a tax effective way.
“While we would not recommend purchasing an asset purely for the tax deduction, small businesses that are in a position to purchase eligible assets under $20,000 before the end of June will be able to make the most of both low interest rates and the immediate write off,” Ms McVeigh said.
She urged business owners to seek guidance from their accountant, as every business will be in a different situation, with varying financial positions and future goals.
“It’s essential to be communicating with your tax accountant and your bank right up until the end of June, especially this year as we await the details of the budget to be passed through Parliament,” Ms McVeigh said.
Mr Constance said small businesses usually have a range of credit facilities, including business loans, overdrafts, lines-of-credit and credit cards, that can be managed to improve a company’s tax position.
“For example, you may consider pre-paying interest on your loans or asking your creditors to charge you interest in advance if you want to reduce your taxable income in the current financial year,” Mr Constance said.
“If your cash flow allows, you may also like to consider talking to your accountant about prepaying expenses such as leases, insurance, utilities, professional fees, marketing costs, and legal fees, which can significantly lower your tax burden.
“Depending on your individual requirements, stocking up on consumables like office supplies prior to June 30 can also be a helpful strategy.”
Other tips for lessening your tax burden
Prepay Expenses: Pre-paying known expenses, such as leases, insurance, utilities professional fees, marketing costs, and legal fees for the following financial year can significantly lower your tax burden. So can stocking up on consumables like office supplies. You can deduct the cost of these types of goods and services if they have been invoiced before June 30, even if they aren’t paid by that date.
Bring forward deductible expenses against an asset sale: If you have sold an asset this financial year and benefited from a capital gain, bring forward as many deductible expenses as possible. Deductions for those expenses may well be greater this year than next, especially if the capital gain has pushed your income into a higher tax bracket.
Write off debts: You can ‘write off’ against your income any debts that have been outstanding for 12 months or more and that are unlikely to be paid. You will need to be able to show that you have made reasonable attempts to recover the debt.
About Suncorp: Suncorp Group includes leading general insurance, banking, life insurance and superannuation brands in Australia and New Zealand. The Group has 14,500 employees and relationships with nine million customers. Suncorp Group Limited is a Top 20 ASX-listed company with $94 billion in assets. Suncorp Bank is Australia’s leading regional bank servicing more than one million personal, SME and agribusiness customers.