The end of the financial year is looming, and you are getting all your paperwork ready for your accountant to prepare your end-of-year financial statements. However, many small businesses are missing out on legitimate tax deductions because they don't take necessary steps before 30 June to claim them. Here are three commonly overlooked deductions that you can take advantage of just by forward thinking.
Pay Expenses in Advance
If you have some extra cash sitting in the bank, look at which of your expenses you can pay in advance before June 30. Operating expenses that you can prepay include rent, telephone, and insurance. By paying these expenses this financial year, it will increase the total of your operating expenses. The higher your operating expenses, the less tax you will need to pay. This is because tax is calculated on the difference between your revenue and your expenses.
If you are able to prepay expenses before the end of the financial year, do not go more than 12 months in advance with your prepayments. Anything more than that will extend into the following financial year, and you cannot claim on that for this financial accounting period.
Make sure you make your final superannuation payment for this financial year midway through June. If you can write the check, have it clear through your bank account, and have it posted to your employee's superannuation account prior to 30 June, then you can claim this payment as a deduction.
All employer superannuation payments made this way before the end of financial year are tax deductible, so the more you pay, the higher your deduction.
Interest on Loans
If you have any business loans that you are paying interest on, remember that the interest is tax deductible. This includes interest charged on overdraft facilities, and that which you will pay for a car loan if the vehicle is one owned by your business.
You should consider speaking to the lender to see if you can prepay up to 12 months worth of interest so that you can increase this deduction just as you would for increasing the operating expenses as already mentioned.
If you are unsure about further steps that you can take to help reduce your tax debt at the end of this financial year, speak to accounting services like Luka Group Accountants & Advisors before the end of May so that you still have plenty of time to take advantage of their recommendations. The more planning you put into reducing your tax debt now, the more money you'll have in the bank after your accountant lodges your return.