Ahead of tax time, Roger Mendelson, executive chairman of Prushka Fast Debt Recovery, is encouraging SMEs to improve their cash position. He said this year it’s become even more paramount as “prolonged effects of the pandemic have ripped through SMEs’ cash reserves”.
As such, “business owners need to preserve as much cash as they can through all accessible avenues”, the tax expert said.
“So many businesses have experienced reduced profits due to the pandemic. However, JobKeeper would have boosted this profit. This profit is still taxable, so when the tax bill arrives, cash is likely to be very tight,” Mr Mendelson said.
“For Victorian businesses who have been doing it tough with the recent snap lockdown, it’s crucial to check your eligibility for the Circuit Breaker Business Support Package. Businesses will be able to apply for up to $5,000 in grants in sectors most impacted; however, to be eligible for this package, there’s a minimum earning threshold of $75,000.
“Cash is king for SMEs and, unfortunately, many small businesses won’t meet this requirement, so it’s important to explore all options to divert revenue and bring forward expenses into the pre-30 period.”
Mr Mendelson noted SMEs should continue to take full advantage of the asset write-off scheme this year, given it was extended in the budget. This, he said, will ensure taxpayers “capitalise fully and ensure taxable profits can be further lowered”.
“There are many other simple ways to get ahead before tax time. Write off invoices older than four months and don’t worry if they get paid later. This will avoid you having to pay GST on invoices you haven’t been able to recover, and make sure you’re not paying tax on income you haven’t received yet,” he said.
“Another way to reduce your taxable profits is to write off any stock laying around that you haven’t been able to sell. Also, if your business has strong cash reserves, you could talk to your landlord about prepaying rent to bring your taxable income down.
“You’re able to claim a deduction for the decline in value of depreciating assets, so it’s important to review your depreciation register.”