Most small business owners are afraid of tax. Tax is an obligation. However, paying them can be a really hard task to fulfill, especially if your small business doesn’t work that well. However, if you can’t do few things that we will explain below, you will get the benefits from the tax. These tips will help your small business to run smoother. And, you won’t have any problem with tax in the future. For a small business, this is a big thing.
Depreciation Deduction for Your Small Business Tax
You can get the deduction for the asset that you have bought before 30 June 2018. This deduction will only work on small business with less than $10 million of annual turnover. However, the assets that applied for this tax deduction is the asset with the value less than $20,000. And, it’s not only it has to be bought by 30 June this year. But, it has to be already used before that date.
The deduction that you can get is 15 percent in the year when you purchase and use it. This will be applied automatically. Therefore, do not forget to ask about this deduction, when you pay your small business tax. Moreover, if the asset is categorized to be the income-production asset, the deduction can reach 30 percent.
Paying the Correct the Tax Rate for Your Business
According to the rule, you need to pay 30 percent of the tax, if your company has the annual turnover of less than $25 million. However, from 2017 to 2018, there is a rule where the company with an annual turnover of less than #25 million can only pay 27.5 percent for the tax. But, there is a way where you can pay the lower percentage of tax.
Previously, there is a test that using the “carrying on a business” measurement to give the lower tax percentage. However, the latest change decides to change the “carrying on a business” test to other rules. This new rule is that your business income must be no more than 80 percent of your company annual turnover. Therefore, after you do the accounting process for your business and found out this number, you have eligibility to get the lower percentage for the business tax.
This matter may be is too complicated, if you do it by yourself. So, do not hesitate to ask help from the professional to deal with your tax. That way you can avoid any mistake that will only give your business a bigger tax percentage.
The Legal Structure
You also need to consider the legal structure of your business. There is a chance that the legal structure that you’ve been used is right for your small business. This will only give you many problems in the future. But, you don’t need to hesitate, if you want to change it. The small business can change their legal structure without getting a penalty for their income tax.
You can do that and transfer the CGT asset, stock, and other assets to your new legal structure. However, you need to understand that the restructuring legal process is complex. Always ask the CPA tax agent in order to know how to do it correctly.
Pay Attention to the Specific Expense and Loans
The income tax will be applied greatly on some aspects that can be considered to be the hidden dividend of a taxpayer. The aspect that you need to pay more attention to is:
– The payment or loan that you receive from a private company or associate, such as family and friends,
– The shareholder or their associate debt that you write-off,
– The expense or asset of your business that is used by shareholder or associate,
– The asset that has been transferred to shareholder or associate.
How to solve all of those problems? You can repay that loan. Or, you also can declare, that is one of your dividends and include it as complying loan.
Dealing with Bad Debts
Bad debts also can be used to get more deduction for your business income tax. You need to write-off those debts. However, there are few conditions you need to fulfill to get the deduction, such as:
– The debt must still exist before the write-off process,
– You must state it as unrecoverable debt,
– The debt must be brought to assessable income or lent account.
Those are several things that you can do, to get the tax deduction this year. Make sure that you do all of them correctly. Using the help from professional is recommended here. Now, you will be ready to face the tax for your small business.