Running a small business is no easy feat. You’re in charge of almost everything, which can cause hair-tearing stress when dealing with your tax liabilities. The good thing is you have several options for lowering your tax bill, and you can reinvest these savings into your business.
Wondering what those are? Let’s figure it out.
What Is Tax Liability?
Tax liability is the tax debt you owe to the Australian Taxation Office (ATO). The total amount is calculated by applying the relevant tax rates to the taxable income.
Taxable income includes the following:
• Salary
• Business Income
• Rental income
• Other specified sources of income.
How to Minimise Your Tax Liability
Let’s look at some ways you can minimise your tax liability if you run a small business:
- Keep Clear Records
Keeping clear and accurate financial records is crucial if you want to claim the tax deductions and credits you’re eligible for. You should choose a record-keeping system or software that allows you to easily track income and expenses.
Plus, you should also keep track of your bank statements. This will help you keep a check on every record and ensure that your financial records are up to date.
- Find Tax-saving Opportunities
Taking full advantage of every opportunity helps you lower your tax liability. Every penny counts when you’re running a small business, so you don’t want to miss out on any chance of minimising your tax liability.
For instance, the Small Business Tax Offset (SBTO) is a great opportunity that provides a tax offset of up to 16% for small businesses with an annual revenue of less than $5 million.
You can also factor in your home office expenses if you use a portion of your home for your small business. These expenses can include rent, utilities, and home office equipment, only if they’re related to your small business.
- Choose a Suitable Business Structure
Small businesses can choose a business structure that can help out with taxes. You can work as a sole trader, do a partnership, or start your small business as a company or a trust. Each of these business structures has different tax benefits, and choosing the right structure depends on your business goals and personal requirements.
For instance, a sole trader is responsible for all business operations, debts, and obligations. They’re taxed as individuals, and their business income is included in their tax returns, making the business structure easier to maintain and set up.
In contrast, registering a company means it will act as a separate legal entity from its owners. Companies in Australia with a turnover of less than $50 million are taxed at a flat rate of 25%.
Having the right accountant such as Accounting Tax Solutions for your small business is the perfect way to ensure your business finances are running smoothly and give you the correct advice and information to help keep your business afloat. Call us today on 07 5559 1200