Every business owner aims for two things: tax reduction and income efficiency. After all, this is what makes a perfect business; one that keeps expenses at their lowest, while maximizing the income. However, this works the other way around when looking to get through tax periods, which means that you should minimize the income and maximize the expenses. This way your assessable income will be reduced, along with the taxes.
What you need to be aware of is that all of this is about perfect timing. This means that you
should move the expenses into the current tax year, while deferring the income into the next one. This will allow you to use the extra money for your business’s benefit.
There is not better financial strategy than accrual accounting. Why? Because it will point out the income and the expenses whenever an invoice or a bill is created, instead of receiving or paying. The best way to go is to keep track of your business’ financial position by using online software, especially designed for such purposes.
First thing to do: check your regular incoming expenses and make sure if there is any you can take on prior to any 30th of each June. We include here insurances, rents and even professional association fees. The accrual method works well because there is no need for spending your cash before the 30th of June, in order to get your well-deserved deduction. That is as long as your invoice is issued before that period of time. Also, consider any future purchases that are set to take place during the incoming financial year. Anything you plan spending in the near future should be considered for an earlier date, if possible. You may want to take advantage of the small business tax concessions that may be part of a limited time offer. However, take it easy! Remember that the entire point of the said strategy is that you should maximize your income through increasing the tax deductions. Don’t go over the top or it may backfire. Only speed up the expenses coming in the near future. There is no point in spending your money on things that you will only be able to utilize several months from now. That’s a bad call.
Delay your income – think it through
Here is a tricky strategy. Calculate your invoicing period for the upcoming months, especially when talking about the more important projects. If there is any chance that you can delay them over the 30th of June, the income tax will have to be paid only next year. What’s the conclusion? More cash for you right now, when it actually matters. It is the same for asset sales, as every monetary gains are subjected to taxes and you should also take into consideration the possibility of delaying them for the next year.
Don’t miss your chance
Since 30th of June is the magic word, try and take advantage of it. Once this deadline has passed, you will have missed your chance to maximizing the benefits coming from accruals. Invest in your planning as fast as you can, and you can get what you have planned for in the upcoming financial year. It’s very important that you get good advice from your accountant and have them work out the best possible solution to enable your business to thrive while saving you time and money along the way.