TAX PLANNING 2020
TIP #2 – BONUSES
Did you know that it can be more wealth and tax effective to pay year end bonuses to business owners than retain earnings in the business?
It is also an ideal time to consider paying performance based year end bonuses to your team!
Here’s some helpful tips on how to assess whether this is something you should be thinking about in the lead up to 30 June.
🚩 Ensure your bookkeeping is up to date, and banks reconciled, preferably at 31 May 2020
🚩 Update fixed asset register, transfer assets to pool, and run depreciation full year. (Also journal amortisation on intangible assets)
🚩 Review your profit & loss comparing to prior year and recode where necessary. (Also tidy up your balance sheet accounts)
🚩 How’s your net profit looking? Do you have excess profit that can be paid out as bonuses?
All of this is done accurately by preparing an ANNUAL TAX PLAN well in advance of year end, giving you enough time to take action and save real tax dollars!
What to be aware of when paying bonuses:
✅ Bonuses attract SUPER, so include this when assessing net profit
✅ Bonuses to BIZ OWNERS need to be distributed in line with their personal tax position, and where it is more tax effective to distribute profit than retain in the business
✅ Bonuses to TEAM must be PERFORMANCE based, avoid paying bonuses for no particular reason
✅ Consider your CASH FLOW, does the business have spare cash to pay bonuses
If you have any questions at all regarding financial and business matters, please don’t hesitate to contact me by email or phone.
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If you are a business owner and you would like to learn more about how you can produce an accurate and reliable set of financial records for your business for maximum value and minimum cost, please contact us to request a free consultation.