The end of the financial year can be pretty stressful for all businesses. Out of everything, completing tax returns is the most stressful thing. But when you do a bit of expert help and pre-planning you can easily lessen the stress during tax time. It will also help you maximize your sole trader tax return with no hassle. As a sole trader, you need to make sure everything is running smoothly within the year-end.
For such reasons, you must start thinking about the things you need to complete the 2020 income tax return. If you are not sure where to begin, you can opt for the accounting services Perth of a professional accountant. Doing so will also stop you from meeting unexpected issues.
Tips on tax savings for sole traders
As a sole trader, taking care of your finance is not that simple. You can call in the professional sole trader accountant to help you with your business finances. However, if you want to have your taxes fully organized, you can take a look at the tips that are provided below. It’s guaranteed that you gain some idea on how to maximize your returns so that you get to jump-start the next financial year.
1. Start-up expenses are easily deductible:
The ATO or Australian Taxation Office has declared on July 1st, 2015 that all small businesses have the right to deduct certain start-up expenses. These expenses should be the ones that were previously needed to be expensed over 5-years. The deductions are only available to small businesses if they have a turnover of $10-million. You can claim two types of expenses. Firstly, the fees paid to the professionals for getting their advice or services of the proposed structure of your business. Lastly, the payments made to a government firm for charges, fees, taxes, which are related to setting up or establishing a business.
2. $20,000 asset write up for small businesses:
Small businesses that purchase an asset that falls below $20,000 can deduct that asset with immediate effect. They do not have to depreciate it for several years. This instant write-off concession was introduced in 2015, and it also ended on June 30th, 2018. After the instant write-off ended on June 30th, 2018, the threshold went to $1000. If you want to take advantage of this write-off, you need to do so before June 30th, 2018. But it’s 2020 now, and the threshold is $1000.
3. Income protection insurance:
Since you are a sole trader, so you are dependent on the income that you make through your business. In many situations, you are the only person who does all the work and generates revenue. So, it makes it more highly essential that you have income protection insurance in place. The insurance will cover your income but will not work for an extended period. But the good news is that the full-cost for the premium of this insurance is deductible.
4. The home office expenses:
As a sole trader, you can operate or run your business right from your comfort zone. If you do so, then you are eligible to make a deduction for the home office expenses. The expenses for which you can claim a deduction are telephone expenses, cleaning costs, electricity and gas costs, repairs for office furniture and equipment, and computer and internet expenses. If you are living on rent, you can also claim a rental payment. You need to provide the portions of your home that are used for the business. Then get to apply the same proportion for the rental expenses.
5. The superannuation contribution:
The majority of the sole traders are well-aware that they need to make a superannuation contribution. You must start saving for your retirement. You need to make a superannuation contribution every year. As a sole trader, you can donate around $25,000 to your superannuation and obtain a tax deduction for this particular amount. This kind of contribution is dubbed as a concessional increase.
If you want to claim the deduction for your super contribution, you have to notify the superfund through a specified form that you wish to claim a tax deduction.
6. Small business income tax offset:
Recently, the Australian Government has made some cuts to the organization’s tax rates. To deliver a similar advantage to all the partnerships and sole traders, the government introduced a small business income tax offset. This means the small businesses are entitled to receive an 8% rebate, which is about $1000 on their tax payable business income. To be eligible for this offset, your business must have a turnover of $5-million. The ATO will provide you this offset once you include the small business income within your tax return.
Final Words!
All sole traders have to take care of their tax-related issues within the financial year. Doing so will enable them to start the New Year without experiencing any issues or problems. You can take the help of a professional accountant to help you with your tax-related work. Otherwise, you can use the tips mentioned in this document.
