Even in businesses, old habits die hard and when left unchecked, they can create a ripple effect on the most critical area of your business. When running your business, you need to see to it that you are sharper and smarter. The expenses you incur is often claimed as deductions. However, deductions for domestic or private expenses are not considered valid for claims. There are also some other expenses that are excluded. This is why you need to check the following as you may have overlooked them come tax time:
Prepaying your expenses is one reason for overlooked tax deduction. Prepaying your expenses can be done to cover a time-frame, which should not exceed more than one year. The purpose of prepaying expenses is to bring forward your operating expenses before each financial year ends. Some examples of expenses you can prepay are insurance, training events, travel expenses, rent, phone and others.
Your employees’ salaries, bonuses, wages and even commissions taking place before the end of each financial year can be deducted. This can be done even if you have not physically made the payment to your staff by that date. The said payment still counts as work performed within the specified financial year despite the wages and salary not appearing in the PAYG payment summary of the employee until the next financial year.
Bookkeeping, accounting and activity statement preparation are considered the most common deductions you make when running your business. Common deductions may also include marketing and general advertising costs. However, bank fees and charges are still overlooked.
Everything counts with tax deductions and with that said it is important to check your stock and determine which ones are damaged or obsolete. Make sure you write it off or write it down because this practice will create a great impact on the trading stock’s value and your profit margins. Make sure you consider how to value your stock trading every financial year because there might be a possibility that you will be entitled to a tax deduction especially when your opening stocks have already exceeded the closing stock.
Bad debts and financial loss can also be overlooked. As much as possible, you should speak to your financial advisor so you can discuss the steps you need to take to minimise the impact of the loss. Make an attempt to recover bad debts. You can also document the debt as evidence and your financial advisor can help you with the process.
It is imperative that you keep track of the tax laws and regulations as they change frequently. You can prevent issues with filing your tax claims if you aware of these changes.
Peter Broberg is a bookkeeping professional with over 20 years experience in the finance sector. With more than 2 decades of experience, Peter provides payroll and bookkeeping services on a professional level. His services cater to small and medium enterprises in Cannington, Kalamunda.