6 tax tips to help arm your small business at tax time (FY2022-2023)

Small business owner opening shop

Small businesses have faced some hurdles this year with the increased cost of living, goods and rent. Coupled with an employee shortage, there is enough on business owners plates without the stress of the upcoming tax season. 

Want to free yourself of the burden that is the end of the financial year? 

We spoke to tax expert Mark Chapman from H&R Block who gave us 6 tax time tips to help you with your small business this tax period.

Let’s get into these a bit more to help prepare your small business for tax time.

1. Records, records, records

The golden rule of tax season is good record keeping, it will be your best friend. Tax laws require that you keep records of the following documents for 5 years: 

  • sales receipts
  • expense invoices
  • employee records (wages, super, tax declarations, contracts)
  • vehicle records
  • lists of debtors and creditors
  • asset purchases.

2. Time invoices wisely

This tactic is simple: if you defer income you also defer paying the tax on it. So, if you don’t send out those June invoices until July, the corresponding income will occur in the following financial year. 

In short, this approach defers your tax liability on that income until the next year. 

One important thing to note is that deferring income can also be precarious. There are rules about when income should be recognised in different circumstances and you should talk to your accountant or tax expert about this.

3. Plan ahead to deduct more 

Running a business can have pre-paid costs that continually add up, but deductions can help. “You can get an immediate tax dedication for certain pre-paid business expenses,” says Chapman. “The basic rule is that a deduction is available for expenses that cover a period of no more than 12 months.”

  • Prepaid expenses you are able to immediately deduct include:
  • Telephone services 
  • Subscriptions to trade or professional bodies
  • Rent or leasing charges on your rental premises
  • Bookings for seminars, conferences or business trips

4. Use your debtors to your advantage

No one wants to be owed money, but it is the reality of life when owning a small business. However, there is a silver lining - any debt that your business has had to write off, you can claim as a tax deduction. 

There is some fine print: the debt must be included in the assessable income of the current or previous income year, and you must have a record to document that the debt has been written off.

5. Be up to date with your employees super

Another way you can maximise your tax deductions is by staying on top of your super contribution payments. Chapman explains that employers have to pay superannuation contributions within 28 days of the end of the quarter. For the June quarter, super contributions must be paid by 30 June to accelerate the tax deduction, he also notes.

6. Use schemes while you can!

The Temporary Full Expensing (TFE) scheme is legislated to end on 30 June 2023. 

Chapman explains that “the scheme enables businesses to deduct the full cost of eligible capital assets from their profit for the year, rather than depreciating the cost over several years.” To make it even better, there is no limit to the cost of assets that can be deducted. 

However, there is a catch - the asset you aim to client must be in use by your business by 30 June 2023 - no leaving it in its box.

To be eligible for the TFE scheme:

  • Business must have: an aggregated turnover of less than $5 billion
  • For small and medium businesses (with an aggregated turnover of less than $50 million): full expensing also applies to second-hand assets
  • For businesses with an annual turnover of $50 million or more: second-hand assets are excluded

The post tax clarity might highlight the need for some extra financial support for your business. At Mozo we review and compare the best business loans to help you find one that suits your needs, be sure to check out our small business hub for more information.