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Have you thought of prepaying business expenses before the end of the financial year?

Wednesday, June 17, 2015 Back

With the end of the financial year fast approaching we have seen a lot written on how you can minimise your tax for the current financial year.

We wanted to take this opportunity to share some of what we have read on prepaying expenses as this is a common strategy many small and medium businesses overlook. See below for some highlights along with the links through to the complete articles.

Of course we would suggest you get specific financial advice to meet your personal circumstances, and we always welcome the opportunity to chat to you about your next (or first) campaign with us.

How can you legitimately minimise your tax?

Businesses can do things such as delay invoicing and bring forward expenses to reduce the amount of profit on which they will be taxed. You can pay leave loading as unpaid accrued leave loading is not tax deductible. Think about writing off scrapped, obsolete stock and other assets.

Prepay expenses

Prepaying expenses before year end can reduce your current year tax liability. It can be particularly beneficial if you expect to be on a higher tax bracket this year compared with next year. If payments are due early next financial year, a pre-payment may entitle you to the tax benefit much earlier.

Tax Tip #8 Prepay your expenses

You will qualify for an immediate deduction if you prepay expenses for goods or services rendered during the current financial year (and ends in the next financial year). The deduction will need to be apportioned over the number of applicable financial years, and only small businesses can qualify (less than $2 million turnover).
For instance, if you prepay for an advertisement in a paper that will be run over the next six months from 1 April until 30 September, you qualify for this concession.

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