Smart tax questions for small businesses
Mark Bouris talks about smart tax questions for small businesses
One of the great challenges we face in life generally is that we don't know what we don't know.
This is no more so than in business where there exist a number of tax breaks, subsidies and benefits that are often not well publicised. As a small business owner, knowledge of what is available can be of enormous assistance to the effective running and growth of your small business.
Qualifying Small Business Entities have access to approximately a dozen concessions across Capital Gains Tax, Income Tax, GST and Fringe Benefits Tax. The principal qualification is an aggregate turnover of less than $2 million; so that's where you start. If the annual sales in your business are under the threshold and you're not aware of the concessions available, then you should be. If you're looking at purchasing a business or selling yours then you REALLY should be. Messing up the tax or GST side of a business purchase or sale can cost real money.
I wonder, though, how many people there are working really hard to grow their businesses that are missing out on tax concessions that they are rightly entitled to but are completely unaware of.
I'm not the first person to say that you make your money on assets when you buy them and not necessarily when you sell them. By that I mean it's difficult to make a gain when you pay too much for something. That something could be a property, a share in a company, a work of art or a business and I firmly believe it.
Since the introduction of the Small Business Entity regime and its predecessor you can also save money when you sell if you do it right and that saving is on Capital Gains Tax and the number can be large.
A gain on sale can be exempt from tax if you've owned the business for 15 years. If that's not the case you may qualify for the 50 per cent active asset exemption. That can be in addition to the normal 50 per cent exemption if the asset has been held for greater than a year and in combination may mean you only pay tax on 25 per cent of the gain.
Small Business entities can be eligible to deduct certain expenses immediately. They're entitled to a deduction for prepaid expenses when larger business isn't. They pay GST quarterly rather than monthly and have much simpler depreciation rules than their larger counterparts.
You should seek advice from a qualified tax accountant, or visit a Yellow Brick Road branch where we can arrange to have someone explain it in more detail.
* Mark Bouris is the Executive Chairman of Yellow Brick Road, a financial services company offering home loans, financial planning, accounting & tax and insurance. Email Mark on firstname.lastname@example.org with any queries you may have or check www.ybr.com.au for your nearest branch.
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