Get planning for tax time

TAX: The simplest way to estimate your tax payable is to subtract your business expenses from your income, and then multiply that figure by the relevant tax rate.
TAX: The simplest way to estimate your tax payable is to subtract your business expenses from your income, and then multiply that figure by the relevant tax rate.

I am a builder working for myself. I’ve earned some decent money this year and I’m worried that I’ll be hit with a big tax bill. Is there any way of knowing how much tax I might need to pay, and is there a way to reduce my tax?

The simplest way to estimate your tax payable is to subtract your business expenses from your income, and then multiply that figure by the relevant tax rate.

This can be tricky, as when your income increases so can your tax rate. The ATO website has a calculator that will calculate this for you, if you input your taxable income.

For example, if your income is $250,000 from your building business and you have $150,000 in business expenses, your taxable income would be $100,000. Tax payable on this example would be $24,947 (excluding the Medicare levy).

You could reduce your tax by bringing forward expenses you may not have needed to make until after June 30. This could be new tools, work uniforms or extra super contributions.

You could reduce your tax by bringing forward expenses you may not have needed to make until after June 30.

Marcus Davis

If your turnover is less than $2 million, you can spend up to $20,000 on depreciable assets such as tools, and claim an instant deduction for the cost. This is instead of claiming the cost of the asset over its useful life.  Any protective clothing or compulsory work uniform that displays the business’ name or logo is deductible.

Business owners can claim a tax deduction for additional super contributions they pay to their super up to their cap level. I would suggest seeking advice from a financial planner before making any contributions.

For example, you decide before June 30 to purchase general tools and protective clothing that cost $17,000 and make additional taxable super contributions of $8,000.

Using the previous example this would increase your deductions to $175,000. This reduces your taxable income to $75,000. Your tax payable is now $15,922 which saves you $9,025 in tax.

This information is general in nature and readers should seek specialist advice before making financial decisions. Crowe Horwath (Aust) Pty Ltd ABN 84 006 466 351 Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees.