Keep Calm & Pay Your Tax
It’s all too easy to let your tax liabilities build up these days. However, with over $30B of tax liabilities, the ATO is getting tougher with their collection methods. The trick is to stay calm, consider your options and act early.
It was around 5,000 years ago in ancient Egypt when taxation started. Tax in those days came as either a tenth payment on income or what's known as a corvée - forced labour for those too poor to pay the Pharaoh. Although the punishments for making tax errors are less disciplinarian these days, you'll still want to avoid them by paying correctly and on time.
Even the most well run companies experience the shock of owing the tax office a substantial amount of money at one time or another. Before considering skipping the country however, these business owners need to consider their options.
Finding finance for tax debt
If a business needs to raise capital to pay off outstanding tax debt, they can use their existing assets to raise the much-needed capital.
For example, Confidential Debtor Finance offers businesses the ability to unlock the capital in their yet unpaid invoices, without the need for real estate security or changing collections processes.
Alternatively, a "sale-back" facility against plant and equipment allows a business to essentially sell their existing assets to a financier and lease it back over a suitable term. The funds raised from the sale could be used to pay back any outstanding tax debt, before the ATO brandish their metaphorical whip in the form of garnishee notices, director penalty notices or legal action.
Notwithstanding the need to pay tax bills as and when they fall due, businesses should consult their accountant to ensure that they do not pay more than their fair share. Effective finance solutions are a key to improving a business’s tax position.
Tax tools at your disposal
The latest Federal Budget has given eligible businesses the option to buy new equipment and make immediate tax deductions. Where previous deduction limits were $1,000, the 2015 Federal Budget made items up to $20,000 dollars immediately 100% tax deductible.
However, businesses still have to afford these purchases in the first place if they want to make the most of the immediate deductions and now could be an ideal time to look into a Secured Loan Agreement (formerly known as Chattel Mortgage). Under a secured loan agreement the business obtains ownership of the equipment from the outset, making immediate depreciation possible without the requirement of an upfront capital outlay. Smart.
For maximum effect, businesses can also use this opportunity to invest in clean energy assets that lower their costs (e.g. solar PV, energy efficient lighting or HVACR). Brilliant.
No need to worry if your business does not qualify for the accelerated depreciation measures, as you can still access tax effective finance solutions for essential equipment purchases.
Whatever the situation, Classic Funding Group has a suite of finance solutions which can be tailored for your specific business and situation. Give us a call on 1300 780 895 to learn more.
Please note: Classic Funding Group does not provide financial advice. You should obtain your own financial advice on the tax and accounting treatment of any finance solution you choose.