How to Pay Less Taxes- Legally!
Paying taxes can be a nightmare. The mere idea of dealing with tedious paperwork, finding deductions, and filling accurate returns can be exhausting.?
Worse, simple mistakes such as an overlooked invoice can result in heavy penalties or legal sanctions. It’s no wonder then that professionals and business owners alike dread tax season.?
Preparing for taxes can be tedious, and then there’s the actual taxes you need to pay, which can be a burden – especially if you’re running a small business.?
Fortunately, there are legal ways to reduce your taxes.?
Let’s take a look.?
Reducing Taxes the Legal Way?
Big corporations hire professional accountants and compliance officers to handle the nitty-gritty of filing taxes and to optimise their tax savings.?
However, there are also plenty of ways small businesses can cut down on taxes starting with these strategies:?
Strategy #1: Claim Tax Deductions.?
The Australian Taxation Office allows small businesses to claim deductions for legitimate business expenses. These include rent, utilities, salaries, and office supplies - anything related to running the company.?
By availing these allowable deductions, you can reduce your taxable income. Just document everything you need to substantiate your claims.?
Strategy #2: Take Advantage of Tax Concessions.?
You can also avail of tax concessions, which incentivise certain behaviours or activities.?
If you’re an AU-based small business owner, for instance, you can be eligible for instant asset write-offs, simplified depreciation rules, and small business income tax offsets.??
Strategy #3: Maximise Superannuation Contributions.?
Contributing to your (or your employees’) superannuation funds can be beneficial tax-wise. You can deduct the amount you contributed, effectively reducing your taxable income.?
Strategy #4: Plan Your Capital Gains Tax.?
The government taxes you every time you profit off selling an asset.?
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Proper planning minimises the impact of capital gains tax (CGT) on your investment returns. You can also:?
Strategy #5: Engage in Research and Development.?
Research is an indispensable part of growth and innovation. But did you know that it can also provide tax incentives??
With the Research and Development (R&D) Tax Incentive, AU small businesses can engage in eligible R&D activities and they can get a tax offset for the same. Win-win, right??
Strategy #6: Make Charitable Donations.?
There’s a good reason why corporations make donations. It’s not just about corporate social responsibility, but these also happen to be a legal way of reducing taxes.?
Donations to registered charities in Australia are tax-deductible. Not only do you get to support worthy causes, you also get to pay less taxes.?
Strategy #7: Choose the Right Business Structure.?
Your business structure (sole trader, partnership, corporation, or trust) will determine what and how much taxes you pay.?
Hence, it’s important to figure out which structure works best for your business. Take into consideration the different tax rates and concessions applicable to each business type.?
Strategy #8: Seek Professional Advice.?
Just like the weather, tax laws and regulations change all the time. This is where professional accountants and qualified tax advisors come in. They identify and implement legal tax minimisation strategies unique to your specific circumstances.?
But if you’re running a small business, it’s more cost-effective to outsource accounting . This approach allows you to get the benefits of expert advice without the price tag of an in-house team.
This way, you can go through tax season with a lot less stress - and costs.?
Check out this guide for more information on the different forms of tax relief available to AU small businesses.?
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