With tax time just around the corner, many SMEs could miss out on important tax concessions because they’re not aware of what they can legitimately claim. Here, tax expert Adrian Raftery explains how you can avoid this.
The recently published Dick Smith Productivity Study of more than 500 small business and office workers found that 55 per cent of Australian small business owners admit to not knowing the details of possible rebates and prefer to leave the number crunching to their accountant. This is at the detriment to the bottom line of their business.
One of the major tax breaks that can be accessed prior to June 30 is the ATO’s subsidisation of new office equipment costing less than $6,500. Under the ATO’s simplified depreciation rules, small businesses can get an immediate tax write-off for the full amount this year. This means you can essentially re-fit your office with brand new, functioning technical equipment by writing off new business assets rather than depreciating them over several years under the old tax rules. There is no limit to the number of assets that can be purchased under the $6,500 concession.
Becoming more educated on tax concessions won’t just help your bottom line. The Dick Smith survey also revealed new office equipment can considerably improve staff productivity. Small business owners are currently spending an estimated 214 million hours a year dealing with technical glitches, costing businesses in excess of $1.1 billion. Office workers, in particular, are spending up to two weeks of the working year trying to fathom out paper jams, printer issues and crashing computers. This is time that could be much more wisely spent.
Problematic office equipment is also causing more stress in the workplace, with one in four have felt like smashing a computer or laptop screen when issues strike, and seven per cent having cried due to lost documents or computer crashes. The main cause of these issues is that office technology is too old or faulty. People are placing more and more demands on technology. They’re more likely to use tablets for work and personal use, meaning we’re outgrowing our devices at a faster rate than we’re replacing them. To prevent technical glitches and issues, these assets should be updated at least every two years – research shows this will pay dividends down the track.
It may not just be a case of the cost of new equipment; the ultimate barrier appears to be a lack of understanding on how best to use technological devices. For example, many people put pressure on their hardware to store data, when a more efficient cloud storage system will get better results and prevent computer crashes and delays. It’s worth visiting a full-service electrical store to understand what equipment is right for your business and your budget.
Aside from the $6,500 immediate write-off of new assets, there are other tax concessions that small businesses can claim. Business owners can now contribute up to $25,000 each per year into super, which is only taxed at 15 per cent within the fund, and businesses can claim a tax deduction for the contribution.
Many businesses may find they have old plant or stock at the end of the financial year that they can’t sell, or have debts that can’t be collected. Writing off old plant or stock before June 30 will provide another tax deduction this year. Deferring taxable income to next financial year where possible, such as delaying the receipt of cash income and deferred invoicing until next year, will also help with this year’s tax bill.
In the past, tax planning has been restricted to smoothing taxable income against future years. However, under the new carry-back tax loss legislation, companies will be able to incur revenue losses up to $1 million this year and receive a refund for tax paid last year. With only one month to go before tax time hits, now is the time to take advantage of tax breaks.
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