Key Considerations for Tax Planning in 2020

Effective tax planning is essential for any business. This blog will provide practical tips and strategies for tax planning in 2020, helping businesses minimize tax liabilities and make the most of tax-saving opportunities.

1. Leverage Instant Asset Write-Off

The Instant Asset Write-Off allows businesses to immediately deduct the cost of eligible assets purchased and used in the same income year. For the 2020 financial year, the threshold was increased to $150,000 per asset, and the measure was extended to businesses with an aggregated annual turnover of less than $500 million. This provision enables businesses to reduce taxable income by claiming deductions for asset purchases.

2. Prepay Expenses

Businesses can claim deductions for prepaid expenses, such as insurance premiums or rent, in the year they are paid, provided the payment covers a period of 12 months or less. This strategy allows businesses to bring forward deductions and reduce taxable income in the current year.

3. Defer Income

Deferring income until after the end of the financial year can reduce taxable income for the current year. This can be achieved by delaying invoicing clients or receiving debtor payments until after June 30. However, this strategy should be used cautiously and in accordance with accounting principles.

4. Utilize Small Business Concessions

Small businesses may be eligible for various tax concessions, including simplified depreciation rules and tax offsets. These concessions can reduce tax liabilities and administrative burdens. It's important to review eligibility criteria and ensure compliance with the Australian Taxation Office (ATO) guidelines.

5. Review and Update Tax Records

Maintaining accurate and up-to-date tax records is crucial for effective tax planning. Regularly reviewing financial statements, updating logbooks for business vehicles, and conducting stocktakes can ensure that all deductions are accurately claimed and that the business remains compliant with tax regulations.

6. Consult with Tax Professionals

Engaging with tax professionals can provide tailored advice and strategies specific to your business circumstances. They can assist in identifying potential tax-saving opportunities, ensuring compliance with tax laws, and optimizing overall tax positions.

Implementing effective tax planning strategies is vital for businesses to minimize tax liabilities and enhance financial performance. By leveraging available deductions, concessions, and strategic planning, businesses can navigate the tax landscape more effectively. Consulting with tax professionals can further ensure that tax planning strategies are aligned with current laws and regulations.

If you would like to enquire about advisory services, book a complimentary consultation with DGMS Group.

MYOB. (2020). 10 small business tax strategies for 2020. Retrieved from https://www.myob.com/au/blog/10-small-business-tax-strategies-for-2020
Small Business Development Corporation. (2020). Tax planning tips to maximise your return. Retrieved from https://www.smallbusiness.wa.gov.au/blog/tax-planning-tips-maximise-your-return
Elephant Advisory. (2022). 12 great tax planning strategies for 2022. Retrieved from https://www.elephantadvisory.com.au/blog/12-great-tax-planning-strategies-for-2022
Grow Advisory Group. (2020). Tax planning strategies for small businesses. Retrieved from https://growadvisorygroup.com.au/business-accounting/tax-planning-strategies-for-small-businesses