Are you looking to save money on your business taxes in 2024? Managing taxes can be tricky, especially with all the rules and regulations. But don’t worry! There are simple strategies you can use to reduce your tax liability and keep more money in your business. At Taxgain, we specialise in helping businesses in Sydney with tax, accounting, SMSF, and finance solutions. In this blog, we’ll share some significant tax savings tips to help your business pay less tax. Let’s get started!
1. Take Advantage of Small Business Tax Concessions
Australia offers several tax concessions specifically for small businesses. These concessions can significantly reduce your tax liability if you’re eligible.
Example:
If your business earns less than $10 million a year, you might qualify for the Small Business Income Tax Offset. This can save you up to $1,000 in taxes. You can also use the instant asset write-off, which lets you immediately deduct the cost of assets like office equipment or vehicles costing less than $20,000.
Action Step:
Check if your business qualifies for these tax breaks. Talk to our professional tax advisors to make sure you’re taking full advantage of them. These tax savings tips can significantly reduce your tax liability.
2. Maximise Your Deductions
Claiming all the deductions you’re entitled to can significantly lower your tax bill. Deductions are expenses you can subtract from your income, so you pay tax on a smaller amount.
Example:
If you purchased a new laptop for $2,500 for business use, you could claim this as an immediate deduction under the instant asset write-off scheme. Similarly, if you have a home office, you can claim a portion of your rent, internet, and utility bills.
Action Step:
All of the company’s spending should be accurately tracked every year. Use accounting software to track and categorise your expenses to make it easier to claim deductions during tax time.
3. Make Superannuation Contributions
Contributing to your superannuation (super) can help reduce your tax bill. Super contributions are usually tax-deductible, meaning you can subtract them from your income and pay less tax. By using these tax savings tips, you can easily maximise the amount of tax deduction.
Example:
If you put $10,000 into your super fund, you can deduct that amount from your taxable income. This not only lowers your tax bill but also helps you save for retirement.
Action Step:
Decide how much you can afford to contribute to Super each year. Be aware of the contribution limits to avoid extra taxes. Our expert accountants can help you figure out the best amount to contribute.
4. Choose the Right Business Structure
The way your business is set up affects how much tax you pay. The most common business structures are sole traders, partnerships, companies, and trusts. Each one has different tax rules.
Example:
If your business is set up as a company, you might pay a lower tax rate of 25%, which can be less than the individual tax rate that can go up to 47%. This can lead to big tax savings, especially if your business makes a lot of profit.
Action Step:
Review your current business structure with our tax advisor. If your structure isn’t tax-efficient, consider changing it to save on taxes.
5. Invest in Tax-Effective Options
Certain investments can offer tax benefits. These investments can help you earn income and save on taxes at the same time.
Example:
If you invest in a negatively geared property, the rental income might be less than the property’s expenses. This loss can be deducted from your other income, reducing your overall tax bill.
Action Step:
Look into investments that provide tax benefits. Consult with our financial advisor to choose the right investments that fit your financial goals and offer tax savings.
6. Use Tax Losses to Your Advantage
If your business has lost money in the past, you can use those losses to reduce your tax bill in future years. This is known as carrying forward tax losses.
Example:
Let’s say your business lost $50,000 last year, but this year it makes a profit of $100,000. You can use last year’s loss to reduce this year’s taxable income to $50,000, which means you’ll pay less tax.
Action Step:
Keep track of any losses your business incurs. Work with our accountant to apply these losses to future tax returns correctly.
7. Claim R&D Tax Incentives
If your business spends money on research and development (R&D), you might qualify for the R&D Tax Incentive. This incentive provides a tax offset for eligible R&D activities, helping to lower your tax bill.
Example:
A tech company that spends $200,000 on developing new software can get a 38.5% tax offset. This could reduce its tax bill by $77,000.
Action Step:
Identify if your business is involved in any R&D activities. Keep detailed records and speak to our tax advisor to understand the tax benefits you can claim.
8. Pre-pay Expenses
Paying for some expenses in advance can help you reduce your taxable income. By pre-paying expenses, you can bring forward deductions and lower this year’s tax bill.
Example:
If your business has a $10,000 insurance premium due, you could pay it before the end of the financial year. This way, you can deduct it in the current year.
Action Step:
Look at your upcoming expenses. Consider paying for things like rent, insurance, or loan interest before the end of the financial year to claim them as deductions.
9. Hire a Tax Advisor
A professional tax advisor can help you handle the complex tax laws and find opportunities to save money. They can provide tailored advice to ensure your business is as tax-efficient as possible.
Example:
A tax advisor can help you with strategies like income splitting, salary packaging, or setting up a family trust. These strategies can significantly reduce your tax bill and save you money.
Action Step:
Schedule a consultation with a tax advisor from Taxgain. Our experts can provide personalised tax advice and help you implement effective tax-saving strategies.
10. Stay Updated on Tax Changes
Tax laws can change frequently. Staying informed about these changes can help you take advantage of new tax-saving opportunities.
Example:
Recently, the government introduced temporary full expensing, allowing businesses to deduct the full cost of eligible assets immediately. Knowing about such changes can help you save on taxes.
Action Step:
Sign up for tax updates from reliable sources. Regularly review your tax strategies with your advisor to ensure they remain effective and compliant with the latest laws.
Conclusion
Reducing your tax liability is essential for keeping your business financially healthy. By following these tax savings tips, you can minimise your tax burden and keep more money in your business. Taxgain is committed to helping Sydney businesses overcome their tax and financial challenges and boost their profits for growth. Contact us today to find out how we can help you save on taxes and achieve your financial goals.
Remember, effective tax planning is an ongoing process. Don’t forget to include all these given tax saving tips in your strategy. Start implementing these tips now to maximise your tax savings in 2024 and beyond!