A simple way to estimate the tax you may need to pay is to multiply your taxable income by the relevant tax rate. Your taxable income is generally everything you earned in the business, less any business expenses, such as rent for your business premises, electricity, telephone, internet, car and fuel costs, and may include home office expenses. When your income increases, so does your tax rate, which makes the process of calculating your owed tax complicated. The Australian Taxation Office website has resources to assist you.

If you are intending to make purchases prior to end of financial year, most small business tax saving strategies involve spending money to claim tax deductions, so it's important to consider your cash flow. Fortunately, due to the aftermath of COVID-19, temporary rules have been introduced to assist businesses with their taxes. One such rule allows taxpayers to write off the full value of purchases installed and ready for use in the 2022 and 2023 financial years. This is referred to as the 'temporary full expensing' rule. If your revenue is less than $5 billion, you can immediately deduct the full cost of eligible depreciating assets as well as the cost of improvements to an existing asset if these have been installed ready for use during the 2022 or 2023 financial years.

Interestingly, an additional rule was made for businesses with an annual turnover of under $50 million where they can use these rules to deduct the cost of second-hand depreciating assets. However, if you are planning to purchase a car for your business, it's important to be aware that the car limit is $60,733 for the 2022 income year.

Another common strategy before end of financial year is to make tax deductible superannuation contributions. Subject to cash flow, this strategy involves making additional contributions to superannuation above the legislated 10 per cent for which you may be eligible to take a tax deduction. I would suggest seeking advice from a financial planner before making any contributions.

A third strategy involves making prepaid business expenses relating to the next 12 months. Examples of these expenses include repaying your lease payments, interest or insurance. Importantly, these prepayments must be required under a contractual agreement, such as a lease or bank loan, rather than choosing to prepay 12 months.

I hope these strategies can work for you to significantly reduce your tax payable. If your business has grown successfully, it may be time to re-evaluate whether your business entity structure is still tax effective by speaking to a tax adviser regarding restructuring to gain tax efficiency.

If you would like more information on this topic or have another tax question, please contact the Findex team at albury@findex.com.au

Any information in this article has been prepared without taking into account your personal circumstances. You should seek professional advice before acting on any material. While reasonable care is taken in the preparation of this information to the extent allowed by legislation, FINDEX (AUST) PTY LTD ABN 84 006 466 351, accepts no liability whatsoever for reliance on it.