TAX PLANNING 2020
TIP #6 – PLANNED PURCHASES
If your business is approaching financial year end with excess profit, a useful way to absorb this profit for tax saving purposes is to bring forward any planned purchases that you may have. By planned purchases we mean necessary spend that is planned for some point in time in the near future.
Do you have excess profit?
Think about any planned spend that you may be able to bring forward to before 30 June.
Here’s what to do:
🚩 Ensure your accounting file is up to date and banks are reconciled to the day
🚩 Display report Profit & Loss from 1 July 2019 to date
🚩 Consider adjustments such as depreciation which will impact profit, particularly in 2020 with the Covid-19 write off provisions
🚩 If there is still excess profit, list your upcoming planned purchases and total them
🚩 Calculate the tax savings on the brought forward deduction at the current company or individual tax rate (depending on your business structure)
🚩 Decide whether the tax savings are worth implementing your brought forward planned purchases strategy
What to be mindful of when bringing forward planned spend?
✅ Ensure your planned purchases are necessary, so that you are not buying unnecessary items purely to save tax
✅ Assess your cash flow, if bringing forward purchases is likely to strain your cash flow this may not be the right time to implement strategy as tax savings take time to realise
✅ Spending during the Covid-19 pandemic may not be the right choice for your business, it may be wiser to nurture your cash
✅ If your planned spend are fixed assets, these items are claimed over time, so consider if bring these forward will achieve the tax saving result you are aiming for
✅ Note the special write off rules around Covid-19 that allow full claim of fixed assets under $150,000 where purchased between March and June 2020
*** IMPORTANT *** If you do not have a TAX PLAN 2020, get in touch and ensure you are well prepared in advance of financial year end. As a result of Covid-19, businesses are in line for material tax savings never experienced before, all designed to assist your business through the pandemic.
If you have any questions at all regarding financial and business matters, please don’t hesitate to contact us.
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