End of Financial Year Strategies for Business Owners
The end of the financial year is a busy time for businesses as they work to ensure their business and personal tax affairs are in the best shape possible for June 30. This is the time to get their books in order. In their busy schedule, they also have to take some time out for reviewing their business performance and see if they can make any improvements for a better return next year. There are 5 simple strategies that can help you get curtail your tax liabilities at the end of financial year.
Make Investment into Super
Tax eats up to 49% of your income. Under certain conditions, you can make super contributions and claim them as tax deductions. If you are a private business owner and your company has made surplus capital, you can withdraw that money, give yourself a dividend, and then use its proceeds to do a personal after-tax contribution to the super. Over time, you will come out ahead due to the tax concessions available you get from super.
Managing the Capital Gains Tax
Managing capital gain and capital loss can be a vital tool to reduce or at least delay your tax payments. If you can sell an asset that has been performing poorly before 30th June, you can show that your capital loss offsets your capital gain. Similarly, if you want to sell a profitable asset, you should avoid doing so till after 30th June. This way, you can suspend your tax payment for the asset’s capital gain for another year. Also, if you are expecting a lesser taxable income the upcoming year, then you will have to pay a lower marginal tax rate on this capital gain.
Exploit the Insurance facilities
Depending on the whether you have taken up a life or disability insurance policy or an income protection insurance, you can get a lump sum payment at one go or a continuing income support. When you buy such policies through super fund, you get the opportunity of having a variety of upfront tax rates concessions. If owned by the individual solely, income protection can also be tax deductible.
Have broad Succession planning
It is necessary to establish buy/sell agreements when you are in business with others. It ensures that the business rights transfer to your successor in an orderly manner in case of your demise. Furthermore, if you can fund this agreement by procuring permanent disability, life and total insurances via a super fund, it will reduce the after-tax premiums.
Time Your Expenses and Income
When June 30 is near, you should defer any taxable income and produce tax deductible expenses to reduce your taxable income where possible. You could prepaying the next year’s interest for a fixed rate investment loan, carry out maintenance activities for investment properties and you can also try to prepay next whole year’s premiums on income protection insurance outside super which would be tax deductible in current financial year.