Claim essentials

Getting ready for tax time is all in the planning. Knowing what to claim, and the records you need to back up these claims, can be the difference between the chance of a tax refund and a sizable tax payment. Here are the four essentials you should think about this year.

1. Do your homework

"Have a good idea of what your tax position looks like well before the end of June," says Greg Hayes of Knight Hayes. "There's no point guessing. You want your accountant to be dealing with the facts."

Yasser El-Ansary, tax counsel with the Institute of Chartered Accountants in Australia, agrees. "It's amazing how many small businesses don't succeed because they don't keep proper records of their income and expenditure, and therefore never really know the true state of their financial position," El-Ansary says.

One way to get a better handle of your tax position this year, suggests Hayes, is to ask your accountant to do a pre-June 30 tax review.

"By talking with your accountant before June 30, you can go through some analysis to make sure you pay for things at the right time so that you can maximise your deductions," he says.

Another way, suggests Anthony Bell of Bell Partners, is to start your tax planning a year ahead, on July 1. "It's really important that people plan for the end of financial year so that they don't make post-tax adjustments," he says.

2. Get the timing right

What might seem like a good idea to claim in one year of your business, landing you deductions, may lead to you having to pay tax at a higher rate in subsequent years.

"For example, on a car you can only claim depreciation on the time you've had it," Hayes says. "So buying a car just a month before tax time will not give you any significant benefit.

"Or repairs to an office might be to such an extent that it's deemed to be a major capital expense, in which case it's not a tax saving in this financial year."

Also, consider expenses that can slip into a black hole in your books, such as plant and equipment and vehicle depreciation, El-Ansary says, because they are non-cash items that can be easily overlooked.

Bell agrees. "Often you have long-term documentation but nothing to trigger you to remember to claim the deduction each year," he says. "Yet the deductions should be claimed year to year."

3. Follow the rules

"The tax law doesn't allow taxpayers to claim the private use portion as a deduction," El-Ansary says.

However, particularly in a microbusiness, your car is usually part business and private use. Or travel may have business and private components.

Hayes suggests that you make sure you know the types of log books, kilometre documentation and travel diaries that you have to fill out if you're going to claim a deduction in any of these areas.

Also, he says that small business owners should be aware of superannuation claims. "If you're self-employed or operating through your own company, making a super contribution might maximise your tax deductions," Hayes says.

But again, a lot comes down to timing.

"For example, with the 9 percent SCG super payment: if you make the payment before 30 June you get a deduction, but make it on July 1, and you have to wait another year for the deduction," Hayes cautions.

4. Laws can change

The thing to remember when it comes to your tax, El-Ansary says, is that sometimes what is tax law in one year, may change in future years.

For example, in the May federal budget announcements, what has been known as the entrepreneur's tax offset for small businesses earning $75,000 or under will be abolished with effect from June 30, 2012.

"From that point on, it is proposed by the government that small businesses will be entitled to an immediate $5000 tax deduction for certain asset purchases, including motor vehicles," El-Ansary says.

"A good tax adviser will often save you money in the end, because they will make you aware of all the entitlements that are available to you that you might not have considered."

Margie Sheedy is the author of The Small Business Success Guide, published by John Wiley.

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