With the end of financial year upon us, it is time to take stock of where your business is at and what its financial position is for the year ended 30 June 2009. Reviewing your business’ financial position can allow you to determine what else you need to be doing. Part of considering your business’ performance and ensuring you are maximising every opportunity available is effective cash flow management, as I discussed in our last edition of eNews. It is really important to understand your cash situation and to know how to free up cash in your business. Another key area, which I’d like to address now, is making sure you are maximising your allowable tax deductions and that you are prepared for your tax position before the end of June. You may hear us refer to this process as Tax Planning.
There are some things like super contributions that must be considered and made before 30 June to allow deductions, so timing is very important.
If you hold stock in your business, you can consider how you value it for tax purposes. If you have bad debts, they may be written off this year if unrecoverable.
You may be considering the purchase of new assets. Currently, the government is offering incentives as part of the stimulus package for businesses to spend on new assets. Your business may be eligible for these extra tax deductions on the purchase of assets you were already thinking of buying. This legislation is still in draft form at the moment and was introduced into Parliament last month.
The investment allowance (in its current draft form) will work like this:
Assuming your business is eligible, it buys a new Photocopier for $11,000 including GST to use in your business. The Photocopier is installed ready to use before 30 June.
The business will get the usual deduction on the Photocopier as a tax deduction and be able to claim back the GST on the purchase. This year however, it will also receive an additional tax deduction of 30% in the year of purchase. A further tax deduction of $3,000 will be available.
Every business is different, so it is important that your Tax Planning strategies match your business. Action plans need to be developed to be implemented before 30 June.
Tax Planning is necessary to ensure you are financially well organised. With everything that is going on in the world, now is also a great time to review your profitability and to determine where you could improve and how you can implement changes.
If you would like to discuss tax planning or have any questions on the content of this article, please call our office on 07 3833 3999.