Our Top Tax Saving Tips: A Quick Checklist for Reducing that Tax Bill
Well the end of financial year is nearly here so what can you do prior to June 30 to keep more money in your pocket and not the tax man?
Many proposals from budget night will also impact your future tax position. So take a read through and see which measures can potentially benefit your business.
Small business write-offs up to $30,000
Budget night 2018 extended the small business write-off until 30 June 2019, meaning any assets – valued at up to $30,000 per item – bought by a small business will immediately be eligible for tax deduction. Recommendations have been made to Government to extend this on Budget night 2018 to beyond this date, but we will all patiently wait and see. Please note the definition of a ‘small business’ is expanded to include businesses up to $10 million in revenue.
A superannuation fund remains among the top tax-effective investments available to businesses. While there are any number of rules and regulations that apply to a superannuation fund, it pays to fully investigate your options. Here are some guidelines that can simplify the process for you.
Pay the June quarter Should your superannuation payment be submitted on time it is considered immediately deductible. As you’re obliged to pay the 9.5% superannuation by 28 July at the latest anyway, why not bring your contribution forward by a month? This way you can claim the deduction in the current tax period rather than waiting until next year to reduce your tax?
Pay the maximum contribution Should your retirement strategy include the maximising of your superannuation fund, remember to make as great a contribution as you possibly can in a given tax period. It’s a tax saving opportunity you cannot afford to miss out on.
Year End Stocktake / Work in Progress
The value of your stock inventory at the close of a financial year directly impacts your business’ declared profit margin. The greater your stock value, the greater your profit margin and by extension, the amount of tax owed. Take the time to review your inventory and identify the stock that is past its sell-by date or out-of-date so you can write it off or re-value it to more accurately reflect its current worth. Remember, each stock item listed can be valued at its cost; market; or replacement value.
Ensure you have an accurate record of work in progress as at 30 June.
Review your assets
Write off any assets that no longer serve a useful function in the running of your business and put in a claim their current book value. And while it isn’t applicable to every business, it is worthwhile investigating the other ways in which redundant assets can be depreciated – such as pooling – to increase their deductible worth.
You are obliged to pay tax on every invoice that your business has sent out, even those that haven’t actually been paid. So, take the time to go through the list of clients who still owe you money and write off any “bad debts” now to avoid paying tax on those invoices you know won’t be honoured. Prepare a management meeting document listing each Bad Debt, as evidence that these amounts were actually written off prior to year-end and enter these into your accounting system before 30 June 2018.
If possible, defer issuing further invoices and receiving cash/debtor payments until after 30 June 2018, but don’t cause yourself cashflow problems!
Bring Forward Expenses
Purchase consumable items BEFORE 30 June 2018. These include marketing materials, consumables, stationery, printing, office and computer supplies. Spend the money now and get the deduction this year
Capital building write-off
Should you own a property, it may be worth obtaining a building depreciation and capital allowances assessment; it may just put you in the position to amend your return – even post filing – and possibly be eligible for a refund.
Repairs and Maintenance
Make payments for repairs and maintenance (business, rental property, employment) BEFORE 30 June 2018.
Small Business Concessions - Prepayments
“Small Business Concession” taxpayers can make prepayments (up to 12 months) on expenses (e.g. Loan Interest, Rent, subscriptions) BEFORE 30 June 2018 and obtain a full tax deduction in the 2018 financial year.
Defer Investment Income & Capital Gains
If possible, arrange for the receipt of Investment Income (e.g. interest on Term Deposits) to occur AFTER 30 June 2018.
Minimising your CGT is very often determined by your timing. Firstly, you should ensure the asset in question has been listed as such for no less than 12 months. In a case where you’ve already made a capital gain, identify any investments that are operating at a loss and which you can sell. Investigate if you perhaps qualify for any CGT rollover relief concessions. CGT is a complex issue and while the potential savings can be substantial, it is worth getting expert guidance to avoid falling foul of the tax laws. By extension, if you’re considering buying property, shares or other investments, ensure you get guidance on the correct level of gearing and the most tax-effective financing and structuring.
Vehicle log books
Log books should be kept for a 12-week period so you can demonstrate what a typical travel pattern looks like for your registered business vehicles. This will ensure you can benefit from the maximum possible tax deductions, bearing in mind that exemptions do apply for certain commercial vehicles.
If your business has committed to paying employees bonuses, these bonuses are considered deductible and the amount payable is at your discretion. So, bottom line, you can reduce your tax by finalising and signing off on the bonuses you’re going to pay for the year before filing your return.
Accurately record investments
No matter what type of investments you have (business, property, shares, etc.), ensure their ownership structure is accurately recorded (e.g. company, trust, partnership or individual names).
Tools of the Trade / FBT Exempt Items
The purchase of Tools of Trade and other FBT exempt items for business owners and employees can be an effective way to buy equipment with a tax benefit.
Items that can be packaged include Handheld/Portable Tools of Trade, Computer Software, Notebook Computers, Personal Electronic Organisers, Digital Cameras, Briefcases, Protective Clothing, and Mobile Phones.
If structured correctly, the Employer will be entitled to a tax deduction for the reimbursement payment to the employee (for the equipment cost), claim any GST input credit, and the employee’s salary package will only be reduced by the GST-exclusive cost of the items purchased. You should buy these items before 30 June 2018.
Ensure that the Trustee Resolutions are prepared and signed BEFORE 30 June 2018 for all Discretionary (“Family”) Trusts. Please see us for more information about these resolutions.
There you have it; our top tax saving tips. Depending on your situation, our checklist can help you plan ahead, potentially cutting your taxes by thousands of dollars. That’s effectively more cash to invest in growing your business or to reward your staff with a well-deserved bonus. After all, why would you wish to pay more tax than you’re obliged to?
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