With less than a week left in the financial year, a debtor finance specialist has offered tips for small businesses to get their affairs in order ahead of tax time.
Bibby Financial Services has urged SMEs to prepare themselves ahead of next week, as tax changes from 1 July could hit small businesses hard.
“Almost 40% of SMEs identified time management as a leading business challenge in our latest Bibby Barometer survey, so we are encouraging SMEs to make time to review their business strategy and start planning for the new financial year,” said Mark Cleaver, Managing Director, Bibby Financial Services, Australia and New Zealand. “It is important that SMEs take stock of their financial accounts now, as there are a number of new SME tax opportunities to be aware of and tax change pitfalls to avoid.”
The company offered 10 tips to small businesses facing the end of the financial year:
1. Pay and clean up any super owing before 30 June 2014
A compulsory rise in superannuation contributions, from 9.25% to 9.5%, will take effect from 1 July 2014. Businesses must ensure they are paying employees additional superannuation after 1 July 2014. As superannuation is not tax deductible until it has been paid, it is also important to ensure all superannuation payments owing are completed before 1 July 2014.
2. Be aware of relevant tax changes
A number of tax changes will come into action at the start of July and it is important to consider what immediate and long-term effect these will have on your business and cash flow position. From 1 July 2014, the Medicare levy will increase from 1.5% to 2.0% of taxable income and the new 2% Temporary Budget Repair levy (previously known as the Deficit levy) will come into effect. The Temporary Budget Repair levy will impact any employees earning $180,000 and over. The effect of this new levy may be harder felt by family-run businesses.
3. Get your tax-deductible expenses in order
An easy way for SMEs to claim tax deductions is to pre-pay relevant services and supplies such as office supplies or costs for supplier services, such as accountant fees, up to a period of 12 months or less. By bringing forward tax-deductible expenses and deferring income, you can reduce your taxable income for the financial year.
4. Be aware of all applicable tax benefits
Any business with a turnover of less than $2m is eligible for a wide range of tax benefits within areas such as Capital Gains Tax, Income Tax, Goods and Services Tax, and Fringe Benefits Tax. So make sure you are aware of any tax benefits that may be applicable to your business.
5. Know the value of your depreciating assets
Another tax opportunity for SMEs with a turnover under $2m is available tax deductions on any depreciating assets up to the value of $6,500, purchased before 31 December 2013. Business assets which may fall into this value category include office equipment, computers, printers, work tools, etc.