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As an SME, you generally need two hats when it comes to maximising tax deductions. There are deductions applicable to your business and to your personal circumstances. Also, depending on your situation, personal tax rates may be higher or lower than your business tax rates.
Your business structure—company, trust, sole trader—will determine your business tax rate. To maximise your overall outcome while managing risk, you will need to have the right structure in place. This requires your financial adviser, accountant and legal representative to work together.
As an SME with a busy schedule, it’s easy to assume your advice support team will ensure nothing slips through the cracks; however, your advisors don’t always know every aspect of your life, your partner’s life or your business.
To help ensure you get maximum deductions this EOFY, I have provided a (non-exhaustive) essential checklist:
1. Normal business related expenses that can be tracked through your accounting software:
2. Items generally not in your everyday accounting software that are prompted by your accountant:
3. Special items that apply this year such as a working from home allowance during COVID:
There are three methods available: the shortcut, the fixed rate and the actual cost method. Choose the one that maximises your return. Click on this link to view how this may work for you as an employee of your business working from home.
4. Insurances:
5. Superannuation:
6. Financial advice fees:
7. Courses / education:
Certain schemes could be tax deductible through your business or personal circumstances.
8. Donations:
Don’t forget your donations. Sometimes it is better to do a one-off transfer and claim the deduction rather than putting coins in a tin at the surf club, which is generally forgotten.
9. Items specific to your industry such as research and development.
This list should have started the wheels turning in your mind. Less money paid in taxes means you can stretch your money farther, and you can grow your business and your personal wealth.
Hopefully, the advice pays for itself.
Helen Baker is a licenced Australian financial adviser.