Bucket List Tax Tips for 2022
It is that time of year again.
The end of the tax year is approaching and we are all look at ways of saving tax. This year I want us to take a slightly different approach to tax savings. This year I don’t want you to think of it as paying tax.
This year I want you to think of it as the Government helping you to pay for items on your Bucket List. Imagine how cool it will be to think that the ATO has helped you pay for your skiing holiday in Japan, or your new boat.
Keep reading for my top 5 tax tips for 2022.
Imagine skiing in Japan with your tax savings…
1. Superannuation
Superannuation has always been a great way of saving tax. The amount of taxable contributions that can be made to superannuation is $27,500. At the tax rate of 34.5% that is a personal tax saving of $9,487.50. But it can get better. If your superannuation balance is less than $500,000, you are able to bring forward any unused superannuation amounts from the previous three years. This amount could be anywhere between $0.00 and $25,000 for each of the last three years. This strategy relies on strong cashflow but can be a fantastic tax saving strategy. This is the first amount of saved tax that can be put towards your bucket list.
2. Purchase that Equipment you Need
Is there some new equipment that you need for your business? New computers for the office? A new tractor for the farm? A new dishwasher for your restaurant? Thanks to the Governments generous initiatives, any equipment purchased for use in your business is 100% tax deductible. In the past, this equipment could only be depreciated in the first year at 15%. So this means that $10,000 of new computers for the office would save you $3,450 in tax (assuming a 32.5% tax plus Medicare rate). A new tractor for the farm that cost $100,000 to purchase could save you $34,500 in tax or more. If you need new equipment for your business, don’t wait until after June. Get it now to get the immediate deduction in tax. That pool of tax savings for your bucket list is beginning to build up now.
3. Prepayments
This is where paying attention to your cash flow starts to pay off. If you have the money and you want to save tax, there are a bunch of things you can prepay and purchase to bring forward into the current tax year to claim deductions. The following are the types of expenses you can prepay to get an immediate deduction.
· Employees Superannuation
· Rent
· Accounting Fees (and I’m not just saying that so I get paid quicker)
· Interest on deductible loans
· Business Insurance
· Marketing costs such as a brand refresh or new website
Be rewarded for paying your bills ahead of time
4. Review your Debtors
Most businesses have a level of money that is owed to them by their customers. At certain times these customers go “bad” and wont pay the money that they owe you. This means that you could potentially pay tax on money that you wont receive, unless you write this amount off as a bad debt. This is frustrating and infuriating I know as you have done the work but may not get paid for it. So
then the last thing you want to do is pay tax on it. If there are amounts you don’t expect to receive, then write them off. Otherwise, you not only miss out on the money you earned, you lost the tax you paid as well.
5. Review your Stock Levels
For those businesses that carry stock to sell it is a great time of year to review your stock. If you have been holding some stock for a while that is no longer worth what you paid for it, then you are able to record it for tax purposes at the lower value. If you have stock that you paid $10,000 for but could now only be sold for $5,000 then you can reduce your stock value, and your profit by the $5,000. This write down will potentially save the business owner $1,725 (assuming the tax rate of 32.5% plus Medicare)
Write down your old stock and save on your tax
So there you have it. My 5 top tips to save tax and contribute to your bucket list “slush fund”. Knowing that your tax savings will be going to helping you tick things off your bucket list will drive you to maximise your tax savings.
If you would like more on how you could save tax, why not get a copy of my book "Save Tax – Without Doing Anything Dodgy, Unethical or Against the Law".
David Patterson - Director The Bucket list Accountant
