Preparing your business activity statement (BAS) or income tax return is definitely one of the less glamorous elements of running your retail or ecommerce business. And with all the other administrative tasks that build up at the end of the financial year (EOFY), many business owners are tempted to delay their tax preparation until the last possible moment.
It’s much smarter to get on top of things early. By choosing to take action before the end of financial year, you’ll be able to identify any unallocated funds from this year’s budget, and invest them wisely in ways that will benefit your business while reducing your overall tax liability. If you’ve paid too much tax throughout the year, you’ll get your refund sooner. And even if you’re expecting a tax bill, early payment will help you avoid further penalties and may enable you to set up a payment plan, depending on your circumstances.
Unless you’re in the business of providing financial or tax advice, you’re probably not across the various deductions, offsets and concessions that may be available for your business. You may also be unaware of specific tax rules that relate to your business operations. So we recommend you talk to your tax agent, accountant, or adviser as soon as you get to the end of this post. (They’ll be busy—it’s almost EOFY!)
Here are a dozen things you might like to ask your adviser:
- Are you a registered tax agent?
If this is a yes, you’ll want to include the cost of preparing your tax return or activity statement on your next one, because it’s a tax-deductible item.
- I’ve sold goods overseas. What do I need to do?
If you’ve paid foreign taxes for your overseas sales, you may be entitled to certain business tax offsets, so check with your adviser.
- Are there any bad debts I can write off?
If your clients still have payments outstanding, you may be able to write off the bad debts and avoid paying tax on this non-existent “income”. (You’ll probably also want to take action to ensure you’re not doing more business with the same clients.)
- Can I write off my unsold inventory?
Items that are obsolete, expired, or damaged can be written off, and items that have lost some commercial value may be written down. This creates non-cash expenses that lead to a lower reportable income and a reduced tax liability.
- How should I depreciate my business assets?
Capital expenditure on assets for your business isn’t a deductible expense, but those assets lose value over time, and your financial statements should consider this depreciation. Your adviser will know the best way to depreciate your assets, but it’s worth knowing that certain concessions are available to small business owners. In particular, you should ask about the instant asset write-off scheme.
- What’s this $20,000 instant asset write-off scheme I’ve heard about?
An immediate deduction is available to eligible small businesses that purchase assets or write off depreciation pools up to a threshold, which is currently $20,000 (excluding GST) but will revert to $1000 for the next financial year. Ask your adviser if you’re eligible for this small business tax deduction, and whether any exclusions apply to you.
- I’m well under budget for the year. Where can I invest this cash?
If you’re eligible for the instant asset write-off, you may want to invest in assets that help you sell your products, such as display shelving for your retail outlets, or iPads for use as point-of-sale (POS) terminals in your outlets or at special events.
- What about my website?
Your adviser will let you know whether your ecommerce software and any design or branding expenditure is considered an asset or an expense. If it’s an asset, you may be able to access that instant write-off; if it’s an expense, you may be able to pre-pay for a year of service charges, reducing this year’s reportable income. And either way, it’s a great investment in the future profitability of your business. Even if you’re happy with your ecommerce website, consider exploring how you can make it even better.
- How do I account for software I use in my business?
EOFY is a great time to invest in other software that can streamline your processes and simplify your business administration. You could even roll it all into one, by trialling a new retail platform that manages your orders, procurement, inventory, and customer relationships in a single package. Neto offers annual pricing plans, so you can incur and account for next year’s software expenses in this financial year.
- Are there any other business expenses can I pre-pay to reduce my tax liability?
It’s not just software licensing fees that you can pre-pay. Ask your adviser about pre-paying for staff training, operating licences, permits, insurances, and leases for premises and equipment. They’ll explain whether shifting such expenses into the current financial year will bring a tax advantage.
- Do I get any other small business tax concessions?
The available concessions change every year, and you won’t want to miss out on something you’re entitled to.
- Are these additional expenditures necessary for the success of my business in the next financial year, or just tax reduction strategies?
It doesn’t make business sense to spend more money solely for the purpose of reducing your tax liability, because you don’t get back 100% of what you spend.
EOFY is an ideal time to get on top of your business expenditure and investment. By taking the time to ask your tax agent, accountant or adviser these questions, you’ll learn more about your financial position and identify opportunities to minimise your tax liabilities by investing in your business. Look for investments that streamline your operations and help you sell to your customers.
Neto is the only Australian retail management platform that provides a complete solution for ecommerce, point of sale, inventory, and fulfilment. Our integrated back-end technology enables exceptional and consistent customer experiences via any channel, be it in-store, online or through a marketplace. We automate repetitive tasks and integrate with multiple sales channels to manage orders and shipments. Start a free trial before EOFY!