5 Tax Accounting Tips For Your Business For 2020-2021

February 11, 2021    Accountant Perthwa

Business and personal tax planning have become important these days, especially during the impact of Covid-19. It will be better to reconsider all the long-term business plans that might be affected or tighten up the bookkeeping during these uncertain times. Several tax plans are ideal for organisations, individuals, and companies. Some of the tax plans are long-term tax plans and short-term tax plans. The short-term tax plans will enable you to lessen the taxes by the end of the income year. On the other hand, the long-term tax plans will give you the chance to plan by the end or beginning of the financial year.

Tips on tax accounting for your business

Tax accounting is not an easy job, and in many cases, one needs the help of a professional tax consultant Perth to lead them towards the right path. But the tips mentioned below will surely help individuals and business owners to improve their tax position.

1. The Superannuation:

Individuals or business owners must maximise their superannuation every year. It stands out as the best tax planning because individuals will receive a reduction in tax for investing in their future. The majority of the people can opt for a deduction for the contributions they make within their super account as per their contribution capacity. Doing so will enable them to receive a company tax return, which will be pretty useful by the end of the financial year when you did not reach the concessional contribution cap of $25,000. Changes were made within the rules of superannuation so that low balance members can utilise any contribution cap based on five years.

2. Bad debts:

When it comes to business, all business owners and individuals must check on all the people who owe them money before the end of the financial year. When the debt cannot be recovered, it should be written down as the bad debt before June 30th, 2020. Try to be more realistic, because people who do not pay up before COVID-19 indicate that they are in a much better position. So, writing down bad debts is the best solution.

3. Prepayments:

One must consider bringing forward their expenditures. Take a look at the cash flow. It will reduce the tax. The investors will receive a deduction of interest, which is available for interest expenses associated with the investment income. For people who run a small business with a turnover of $10-million per year, the prepaid expenditure will get deducted immediately under the 12-month rule. The rule applied toward deductible expenses, such as interests, rent, lease payments, insurance, and many other things.

4. Stock on hand:

Individuals who run a business with stocks must ensure a stock-take right before the end of the financial year. The stock will get valued in the form of replacement, market, or cost value, whichever is lower. The difference in valuation will make a massive difference within the tax income. The professional tax accountant Perth will provide individuals with proper understanding and advice on the best valuation techniques. But before that, one must complete their stock-take.

5. Opt for instant asset write-offs:

In certain situations, small businesses have the right to claim instant asset write-offs with no issues. These write-offs stand out as immediate deductions of the cost of the assets for the business portion. This is only applicable within the year in which the asset was first used. The instant write-off is used for multiple assets when the cost of each of the assets is lower, and second-hand and new assets.

The vehicles used for businesses get included within the write-offs. For instance, the car limit stands out as $57,581 for the income tax year of 2019-2020. So, if you utilise around 75% of the vehicle for business use, you can claim an instant write-off under 75% of $57,581, which is $43,186.

Other tax planning tips for the 2021 financial year

The process of gathering all the paperwork for the financial can be pretty daunting. The best way to conduct excellent tax planning is to do the work in advance. Staying organised will keep all the bank statements and receipts in one place. It will also enable an individual to put all the tax strategies in one place through which they both can benefit. Given below are some of the essential tax planning tips for the 2021 financial year.

  • Cloud Accounting: Every individual must deduct all their business expense and make sure they get paid on time. Using a software product like Xero will help in easing out this particular record keeping burden. There is no need to keep single paper receipts. One can click the pictures of the receipts, and it will get transported to the file.
  • Insurance Policies: The income protection policy will protect individuals and their family, and the premiums are tax-deductible. When you consult this matter with a professional business tax accountant Perth, they will tell you to get in touch with a risk insurance broker. Taking out an insurance policy sooner or later will increase the deductible in expense for the year.
  • Employ the Spouse: The spouse can get easily compensated from this if he/she plays the role of managing all the medical practices. One must prepare all the essential documentation and also adhere to all the obligations and rules.
  • The Log Book: Every individual must keep track of their business uses. It will help them maximise all the motor vehicle deductions that are available for them. It will be much better if they try out the ATO (Australian Taxation Office) compliant applications. Taking the help of applications will help individuals keep track of the fuel cost, registrations, servicing, repairs, and insurance.

The Takeaway

Even when there are plenty of uncertainties, individuals can easily opt for the best accounting tips for the 2021 financial year planning. One can take the help of advanced software to track down all the sales and generate reports. Otherwise, taking the help of professional and qualified tax accountants will also help.

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