As each financial year draws to a close, the marketplace gets louder and louder with offers that are designed to get you to spend money before June 30
EOFY Spending and the Risks of Business Tax Deductions
As each financial year draws to a close, the marketplace gets louder and louder with offers that are designed to get you to spend money before June 30. And there’s no doubt the promise of tax deductions and tax offsets can be appealing to many business owners. But is it the right decision for your business? Here are a few things to consider before doing any EOFY spending:
Is your business making a profit?
If so, tax deductions and offsets are only worthwhile if you’re expecting a tax liability at the end of the year. If your business is already making a loss, spending in order to take advantage of deductions will only increase the size of your loss with no corresponding offset.
Will spending create cash flow issues?
Spending money for a tax deduction which would put your business under pressure doesn’t make sense. Cash flow planning with an accountant can help you know where you stand and what your business needs before the EOFY frenzy begins.
Are you making the most of your deductions?
Taxation can be confusing as different rules apply depending on the size of your business. A proper understanding can ensure the right decisions and maximum claims are made.
Are you keeping records efficiently?
By keeping accurate records such as receipts and invoices through one of the many apps which allow you to keep receipts digitally, you can make sure that everything you’re entitled to claim can be supported by the correct documentation.
*The $25k instant asset write-off is still here.
An extension of the legislation introduced in 2018 was made to 30 June 2019. The legislation allows you to claim an immediate deduction on eligible assets purchased for your business. The new or second-hand asset must cost less than 25k and be installed or ready to use in your business this current financial year. This is just one example of taxation legislation that could benefit small business.
A Modoras business advisory expert can help you navigate this EOFY. Get tax ready with end of year strategies that are right for your business with the help of a financial expert. Click here to schedule your appointment.
*It is also proposed by Budget night 2nd April – 30thJune 2020, the immediate asset right-offs to increase to $30k pending legislation to pass through Parliament.
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