4 Tax Planning Tips To Save Tax
Pay yourself more wages
This strategy is mainly relevant if you are running your business in a Pty Ltd Company. Yes, you can pay yourself more in wages! Often business owners are not paying themselves a wage or enough of a wage. This can mean that your low personal tax brackets and tax free threshold are not being utilised for the year, which can lead to paying more in tax elsewhere, e.g your Company tax. By paying yourself enough wages so you don’t waste your personal tax free threshold and lower tax brackets, you generally will see a tax advantage vs keeping the profit higher in your Company and paying tax at the Company tax rate, assuming of course that your personal tax bracket tax rate is lower than the Company tax rate for the year.
2. Additional superannuation contributions
This strategy is great, however it depends on your preferences and age. If you are closer to retirement age, then often this strategy can be a good way to go, as you don’t have too long to wait before you can access your superannuation, however if you are younger, you may not like the idea of waiting for a really long time before you can access your super. With this strategy, you pay yourself additional concessional super contributions (typically via the Company/business as additional employer super contributions, i.e salary sacrifice) up to your concessional super contributions cap amount for the year. This means there is additional tax deductible super contributions in your business, i.e reducing your profit for the year and your tax payable for the year.
3. Instant Asset Write-off
If you have anything you need to purchase for the business, before 30 June is the perfect time to do it. Further, with the Instant Asset Write-off you can write the purchase off in full, which means 100% depreciation in the current year! Great news! Obviously you need to check if the Instant Asset Write-off is still available in whatever tax year you are thinking about and planning for. As always, buying things for the sake of a tax deduction is never something you should do, however if you do actually need to purchase it, then certainly it can make sense to do so before 30th of June. Remember however, you don’t get the full purchase price back in tax, you only get your tax rate % back.
4. Delay revenue & bring forward expenses
If you are able to, you can consider delaying invoicing certain work until early July, this will mean that the sales revenue won’t be taxable in the current year, it will be taxable in the following year. Further with expenses, if you have anything you can prepay or pay early, you could look at doing it before 30th of June, this will mean you get the advantage of the tax deduction and reduced tax payable sooner, versus having to wait until the following year if you pay for it after 30th of June.
These are just some of the tax planning strategies you can consider before 30th of June to help save tax. You should always consult with an accountant before you act on any tax planning ideas to ensure they are right and relevant for your specific situation. If you want to discuss any of these of other tax planning strategies further, please get in contact with us, we are happy to have a chat to discuss your tax situation further and to help you save as much tax as possible.