Tax time 2021-22: Tax Planning PART 1

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In this three-part series we will be reviewing tax planning and future longer-term strategies for your company as we head into the business end of tax time 2021-22.

Why Tax Planning?

Like anything in business, it all begins with a solid plan – or as we like to say a strong foundation.

Applying this to tax strategy for businesses – without a plan, owners can find themselves paying an unnecessary tax bill.

Tax planning is about dedicating time and expertise to developing the best strategy for your business (no matter the size). It is about reducing your taxable income, in turn maximising the money you can keep a hold of.

There’s no ‘one size fits all’ rule to tax planning so businesses need to be on top of all expenses, deductions, and stock levels. This ensures the overall financial situation, goals and limitations are considered when working with your accountant.

Tax Planning Tips

Income projection/expectation for the financial year

Expecting to have a higher income this financial year, compared to your projections/expectations for the next financial year? Talk with your accountant to consider:

• Prepaying some of your 2022-23 business expenses in the 2021-22 financial year. Up to 12 months of the following year’s expenses can be deducted in the current tax year.
• Reviewing and postponing some of your invoicing for the current tax year.
• Topping up your voluntary superannuation contributions. Learn more about superannuation strategies in Tax Planning Part 2.
• Reviewing and writing off any unrecoverable debts.
• Taking advantage of depreciation measures, such as temporary full expensing, instant asset write off, and backing business investment. Learn more about full expensing strategies in Tax Planning Part 2.
• For those businesses who handle staff bonuses, commitment to these must be made before June 30 to claim a deduction.

New business? Talk with your accountant about deductions on start-up expenses, legal and accounting advice on your business structure, and fees in relation to establishing the structure (eg. ASIC company registration fee).

Depreciation of assets

Businesses with an aggregated turnover of less than $5 billion can immediately deduct the cost of eligible new depreciating assets and cost of improvements to existing assets, in their income tax returns.

Small businesses with an aggregated turnover of less than $10 million from July 1 2016 onwards, simplified depreciation rules apply. This includes:

• an instant asset write-off for assets that cost less than the relevant threshold
• a general small business pool, which has simplified calculations to work out the depreciation deduction.

Learn more about the small business pool HERE.

Ensure information is accurate

Accurate, up to date information is an important aspect of tax planning. Current information helps maximise your deductions and allows you and your accountant to make informed tax decisions.

This includes:

• Ensuring you have included any stimulus payments as part of your tax return.
• Checking the log books for your business vehicle are up-to-date.
• If your business carries stock, do your stocktake as at 30 June.
• Accounting for the private use of business assets, such as motor vehicles, when claiming GST on expenses.

Take time to look at both your expected taxable income (your business’s income, minus any allowable deductions) for the current financial year 2021-22 and your projected/expected taxable income. This will help guide your tax planning strategy. Learn more about budget and forecasting in Tax Planning Part 3.

Have you started tax planning?

Haven’t started thinking about tax planning? Never created a tax plan for your business?

Contact the team at Elevate Accounting HERE for an obligation free chat on tax strategies for your business.