Entrepreneurs know fully well that running a start-up doesn’t leave much spare time for anything. Between pitching work for clients, dealing with existing work, and marketing – it’s a thrilling and energetic ride, but it can also be exhausting.
So the last thing entrepreneurs want to deal with is more paperwork, especially around tax time. But while it’s easier for founders to hand everything over to the accountant, by putting in a little extra effort you can score some cash in ways you may not have thought possible.
Using tax strategically
Tax savings are a big business. According to the ATO, businesses deducted $2.5 billion in expenses in the 2013-14 financial year. At the top of the list was cost of sales, and at the bottom were motor vehicle expenses, demonstrating the activities that were more or less likely to be considered as a deductible expense.
Given the likelihood that early-stage businesses are operating at a loss in those first few years, it’s crucial that effort is made to find as much money as possible.
Doing so at tax time can be a particularly efficient way to do this, because once lodged, the money can come back to you in as little as a matter of weeks. All the more reason to get on top of your tax situation now!
As an entrepreneur it’s also worth noting that there may be a range of specific tax savings you could be eligible for. The R&D tax concession, as an example, may be worth looking into if you are an R&D entity that has incurred notional deductions of at least $20,000 on eligible R&D activities.
Making it a priority
Unfortunately as a business owner, it can be easy to get distracted in the everyday hustle of operating the business. Because our business, MoneyMe, moves so quickly it can be hard to focus on administrative issues sometimes when we’re so preoccupied with growth.
But putting the effort into finding out more about these concessions is crucial to keep that cash lifeline open – a critical component of any growth strategy anyway.
Go beyond the typical business deductions this year. Think about your company’s financial position, consider alternative savings – like tax concessions – and start strategising for what you can claim in the year ahead.
To get started, below are some quick wins you should look at in order to maximize your return, and your cash flow;
Rent and utilities
Do you run a business from home or even have a home office? You can claim part of your rent and energy. Just calculate the square footage of your office and use that as the percentage of the costs you can deduct.
You also need to make sure the time is proportioned between how much you spent on business and personal affairs. Keeping a diary for four weeks should qualify as proof.
Advertising
Advertised your business anywhere? That’s a deduction right there.
Insurance
If you pay insurance related to your business, the premiums can go straight on your deduction list. Many small business owners don’t bother calculating this cost – but it can all add up.
Bank fees
Dealing with finance as an individual is a big enough pain, but when you’re a business? It can be even harder. Getting access to quick loans can sometimes be challenging, and easy finance can be difficult to come by.
Thankfully, there are at least some deductions you can claim that make dealing with your money a little easy. Claim any fees on your business accounts on your tax return to give your business a boost.
Write off bad debts
Got any bad debts that aren’t collectable? You can write them off in your next tax return.
Tender expenses
Have you put a tender in for a job, even if you didn’t get it? Then the ATO allows you to write off any costs related to that job.
Airport lounge memberships
If you’re travelling a lot for your business and end up spending a lot of time in airport lounges, you can deduct the cost of memberships for these lounges.
This does require proportioning the time between business and personal use, however, so it may pay to keep a record of this.
Self-education
As a business owner, it’s important to always be learning. That means attending seminars, conferences, and even maintaining a professional library of publications – including magazines – are all costs that can be deducted as expenses.
Legal expenses
Legal expenses can be deductible if used in the context of providing services for your business.
Remember, these costs are all dependent on the fact that you’re keeping solid records – and making sure you have them for at least five years.
The ATO spends time every year targeting certain industries for overdoing their deductions. Don’t let your business get caught in the crosshairs.
James Diago is the Finance Manager of digital consumer finance firm MoneyMe (www.moneyme.com.au). He’s an expert in personal finance and he’s a millennial.
