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Tax Planning Strategies for Franchise Businesses

While all franchises have their own unique circumstances, considering these tax planning tips will help you maximise your tax lodgement.

As June 30 approaches, it’s high time you start thinking about tax planning for your franchise system. We hate to see franchise owners lose hundreds, if not thousands, of their hard-earned money to tax because they aren’t aware of everything you can claim back. It’s also easy to miss declaring different income streams, which can come back to bite you in the future.

Being prepared ahead of time and working with trusted accounting advisors means your lodgement process will be less stressful and time consuming. As EOFY rolls around, there’s nothing worse than wasting your time where it’s not valuable, adding more stress to an already crazy period. Check out these tax planning tips so you can start taking small steps to ensure you’re ready to get back to business in the new financial year.

Tax Planning Tips from the Franchise Specialists

Here at BlueRock, we have every angle of the franchise industry covered. So you can rely on us to identify new opportunities, define growth strategies and effectively execute as one team. When it comes to tax, our accountants take things up a notch to a true partnership, meeting with you regularly to proactively and strategically drive your franchise forward.

While all franchises have their own unique circumstances, considering the following tax planning tips will help us to maximise your tax lodgement.

Perform a Stocktake

Performing regular stocktake is important for all franchise businesses, especially those in food retail. Ensuring that stock loss, damaged or obsolete items are accounted for.

Consider Prepayment

If possible, your franchise business can prepay expenses such as rent, interest, insurance or other services up to 12 months in advance to take advantage of deductions in the 2022 financial year.

Instant Asset Write-off

Franchise businesses with an aggregated turnover of up to $5 billion can claim the instant asset write-off for eligible in-use assets. But before you go ahead and buy the latest Audi or Range Rover, the luxury car depreciation limit is $60,733 for the 2022 financial year, meaning only up to that amount can be immediately claimed.

Utilise Loss Carry-Back Provisions

Franchise businesses that turnover less than $5bn can use the loss carry-back provision, created to provide temporary cashflow support. Losses in 2021-2022 and 2022-2023 can be offset from profits in 2018-2019 and later tax years.

Review Your Plant and Machinery Schedule

Clean up your franchise business’s fixed asset register by reviewing any items that can be written off. This could include writing off assets like superseded POS machines, vehicles or any asset that no longer has a use within the business.

Pay Bonuses 

If your franchise business pays bonuses as part of staff remuneration, in order to claim the bonus as a tax deduction for the amounts, you need to be committed to making the payment prior to year-end, including making a written record of the commitment.

Pay Superannuation 

Superannuation is only tax deductible when paid. Ensure that super payments are made by around 20 June 2022 to allow time for superannuation clearing accounts to process the payments before EOFY.

Review Bad Debts

A bad debt is one that is unlikely to be recovered through any reasonable and commercial means. There are several steps involved in claiming a bad debt deduction. These include writing off the debt and including the amount to offset against your assessable income. So it’s important to review and identify bad debts before tax lodgement

What to Do if You are Trading As a Trust

If you operate your franchise business as a Trust, you need to distribute the profit before 30 June. As such, there are additional things to consider:

  • Who should receive the profits from the trust? The decision needs to be documented in a trust minute prior to 30 June.
  • It is important to check that the Trust Deed allows you to distribute the profits to each beneficiary in the manner you propose.
  • Is there any ATO administration required, such as a family trust election (FTE)? This can be relevant if your trust receives franked dividends or has losses.

ATO and Section 100A – Trust Distributions to Adult Kids

The ATO is cracking down on situations where trusts make distributions to a beneficiary, and someone else apart from that beneficiary receives the benefit of the distribution. An example is where a distribution is made to an adult child, and the parents keep the money. 

As such, the ATO's new interpretation of Section 100A needs to be considered when making distributions. 

Get the Support You Need to Grow Your Franchise

No matter where your franchise is at, there’s a lot that goes into ensuring you max out your business tax return. If you’re ready to take your franchise to the next level, get in touch with BlueRock's business advisors today.

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The origin of the BlueRock name is a mash-up of the founders two favourite things.
Through a mutual love of the Carlton football team and Dwayne 'The Rock' Johnson, a firm was born!