2021 Tax Planning: Strategies to consider

With the end of the financial year approaching, it’s time to start thinking about your tax obligations, review your strategies and make the most of opportunities that are available. 

The importance of tax planning

Tax planning should be part of every business’ management practices as it allows you to think ahead and make smart business decisions which will benefit your business in the long term.

Reasons to make tax planning a priority this EOFY include:

• Minimising the amount of tax you pay and maximising how much money you have after tax.
• Taking advantage of opportunities and tax changes to save money.
• Complying with legislation and meeting your obligations.
• Planning ahead and avoiding nasty surprises.
• Making well timed business decisions.
• Planning for the future growth and success of your business.
• Reducing stress around tax time.

Tax changes you should be aware of for 2020/21 financial year

In light of the Covid situation, a number of tax changes are in place which may affect your business. Some of the changes may offer you opportunities to pay less tax. 

Here are some of the most important tax changes you should be aware of:

Temporary full expensing of depreciating assets

Businesses with an aggregate turnover of less than $5 billion can immediately deduct the business portion of a new depreciating asset.

For businesses with an aggregate turnover of less than $50 million, secondhand depreciating assets can also be immediately deducted.

Instant asset write-off

Changes to the instant asset write-off rules include:

• The threshold for each asset is $150,000 (up from $30,000).
• Eligibility is extended to business with an aggregate turnover less than $500 million (up from $50 million).

Company tax rate

Base rate entities have a lower tax rate of 26% (down from 27.5%).

A base rate entity is a company that has an aggregate turnover less than $50 million and earns 80% or less of its income from interest, rent, dividends, royalties or net capital gain.

Small business income tax offset

The small business income tax offset has increased to 13% (from 8%). It can be claimed if you:

• Are a sole trader
• Receive small business income from a partnership or trust

Further strategies to consider

In addition to making the most of the tax changes above, there are a number of other strategies that you should consider.

These include:

• Paying super contributions on time
• Making voluntary super contributions and claiming up to $25,000
• Writing off bad debts before June 30
• Getting rid of obsolete stock or equipment
• Pre-paying some of your expenses and claiming as a deduction
• Reviewing your Single Touch Payroll obligations
• Reviewing your Job Keeper obligations
• Reviewing your business structure

Effective tax planning should always be tailored to your business and your goals. Done well, it can help bring positive outcomes throughout the whole year, not just at tax time.

For tailored assistance with your 2021 tax planning, call the team at Lawrence Group today on (08) 9433 3288.