It’s almost 30 June and so begins the bombardment to “buy now to get a tax deduction this financial year”.
But is this always true and is it always a wise decision?
Do small business owners even consider their financial position before making these decisions?
Are you spending $1 to save 30c?
Consider the following before you make that EOFY purchase:
1. Do you really need it? Buying stuff you DON’T need seems like a poor business move to me. If you really need to offshoot some funds hire a professional bookkeeper who partners with you and your accountant to make sound financial moves.
2. Is your business making a profit? If you’re not making a profit then you’re not paying tax anyway! Keep your money, improve your cash flow and use the funds to build your business next year.
3. Is it really a tax deduction? Chances are the whole amount may not be tax deductible in this financial year. Talk to your tax agent BEFORE you make any decisions.
4. What’s the true value of the tax deduction? Just because you spend $10,000 doesn’t mean you reduce your tax payable by $10,000. Depending on your business structure your tax will be calculated differently.
5. Is it the best use of your money? Buying new stuff whilst your suppliers, superannuation and tax obligations are unpaid is just dumb. Defaulting on these liabilities may endanger the life of your business and could ruin those that have supported you.
6. Is paying tax really that awful? Yes, that’s what I said! After all, you use the infrastructure as much as an employee on PAYG. Don’t you think it’s fair that you also pay for it? Think about it, if you’re paying tax then you’re making a profit. I’d love to have a healthy tax bill over a loss and no money in the bank!
It’s just plain stupid to wait until the end of the year and then franticly try to reduce your tax bill by making impulsive decisions which may or may not reduce your tax.
You need to implement sound tax planning and strategy throughout the entire financial year.
So, come on guys, hire a professional bookkeeper who teams up with your business coach and your accountant throughout the year to plan a tax strategy the really benefits your business.
Registered BAS Agent
Owner of Small Business Bookkeeping