Tax season may be a particularly stressful time for everyone, especially business owners. It makes sense to want to pay as little in taxes as possible, to retain as much money in your pocket as you can. One way to do this is by minimising your income for tax returns. While this may seem like the most logical solution at first, there are many ways that this strategy may backfire and have severe consequences down the road.
Read on if you are looking for ways to fatten up your bottom line and avoid paying more taxes than you have to. This article will shed some light on why you shouldn’t make a habit of always default to minimising your income for your tax returns and what you can do instead.
Minimising Your Income: Reasons Why You Should Avoid It
While it may sound like a good idea to minimise your business income, it may adversely affect other crucial aspects of your business. Here are some scenarios that may be affected if you make your business income seem too small.
1. You Have Plans to Take Out a Loan
If you are planning to take out a business loan because you intend to expand, you may not be able to get the loan approved if the lender sees that your business income is too low.
There are specific brackets that will dictate the limits of how much a business can loan. Lenders will check your tax documents to check the amount of income your company makes. If they see that your income is too low, you may see your business loan getting declined.
2. You Are Shopping Around for Insurance
Insurance providers also look into tax returns to get an idea of how much money your company makes. Business income protection will come at around 75% of your total income. This insurance should cover any lost income in case you fall ill or cannot continue with normal business operations for whatever reason. If you declare that your income is lower than what it is, just for the sake of paying a smaller amount on your taxes, it may affect the amount of income protection your business can receive.
3. You May Be Doing Something Illegal
Lastly, remember that it is your responsibility to declare your income truthfully. If you deliberately alter your income amount, you may be committing an illegal act that will have serious consequences.
How Not to Minimise Your Tax Return
There may be ways to make your income look smaller than it is without you facing legal trouble. Deferring big purchases until the current fiscal year ends or ask your clients to pay their invoices before the 30th of June. All these transactions will be legal and will help you get the amount of your income into the range you want it to be.
Conclusion
Your best bet to ensure that your income is filed correctly on your tax returns is to work with an experienced tax expert and business accountant. They will be able to help you ensure that you will not be committing any mistakes that may come back to haunt you later.
If you need a professional accountant to help you during tax season, come to Wardle Partners Accountants and Advisors, business accountants and tax experts located in Caloundra on the Sunshine Coast. We have built a reputation as leading Business Accountants and SMSF Experts at Caloundra Sunshine Coast. We make all business accounting, tax, self-managed superannuation fund and audit matters easy while ensuring we get the best possible outcome for our clients. Get the best Sunshine Coast tax agent for your business today!
