Last week we wrote 1-9 tips – this week we have #10-18 on – prepare accounts end of financial year to have great books / accounts that you can analyse – act before 30 June!
10. Offset capital gains with capital losses
If your business makes a tax loss in a current year, you can generally carry forward that loss and claim a deduction for your business in a future year.
However, you may be able to offset current year losses if you’re a sole trader or an individual partner in a partnership and meet certain conditions.
11. Consider the ideal timing for selling asset
Are you planning to sell a profitable asset this financial year, but are likely to earn a lower income in the next year, then it may be worth postponing the sale until after 30 June, as the sale of assets is the net of sale, less the original cost. Alternatively, if you expect an income gain from 1 July, it may be worth bringing the sale forward. As always, your decisions depend on your expectations for future asset prices, so don’t postpone a sale for tax purposes if you are expecting your investment to fall in value!
12. Franking credits
If you plan on paying dividends out to shareholders before the end of the year, it is worth reviewing the company’s franking account to ensure that the company has paid sufficient tax to enable the dividends to be fully franked. This may mean paying ahead of scheduled payments in an arrangement with the ATO. For assistance with calculating your franking account balance, consult your tax agent.
13. Spouse and Family wages
Paying family members – must be reasonable and legitimate for work performed, and these related parties must be using STP by July 2021, but be aware of maximums for children.
14. Depreciation – Accelerated Write off
The accelerated depreciation write-off for assets, the amount is:
- Up to $150,000 12 March to 30 June 2022, extended in May 2022 budget – (special COVID-19 stimulus measures, small business pool)! And for certain entities;
- Up to full expensing to June 2023, under some conditions.
The write-off threshold was previously $1,000 and the concession only applied to businesses with an aggregate annual turnover of less than $2 million, up until 2016. After that, the Government extends access to concessions by increasing the annual turnover eligibility threshold from $2m to $10m from July 1, 2016.
15. Use super to manage Capital Gains Tax
Have you made a capital gain on the sale of an asset this financial year? If you also earn less than 10% of your income from eligible employment, (that is mostly self-employed) you may be able to claim a tax deduction for a contribution to superannuation, which could reduce or offset your capital gain. You will need to be eligible to contribute to superannuation (which means you are under the age of 65, or under 75 plus meeting the work test (after 2017 abolished), and be comfortable having your contribution preserved in super until you meet a condition of release (eg retirement decision and age). SEE more at ATO.
16. Make tax deductible super contributions
There maybe a tax deduction for personal super contributions that you made to your super fund from your after-tax income – for example, from your bank account directly to your super fund.
If you have other non-employer income such as high interest, investment or sole-trader income, you can claim a deduction for your personal super contributions, by giving your super fund a Notice of intent to claim or vary a deduction for personal contributions (NAT 71121) and receive an acknowledgment from your fund. There are other eligibility criteria you must meet. SEE more at ATO.
If you claim a deduction for it, the contribution you make will be taxed at 15% in your super fund, so your tax saving will be the difference between your marginal rate (which could be up to 45% plus Medicare levy) and 15% when it enters super.
17. Review your investment portfolio
Review your investment portfolio (personal and business) and if re-allocation of your investments is required. Consider portfolio allocations – are you over or underweight in certain industry sectors or stocks? Are you continuing to carry stocks that have exceeded your price targets or continue to under-perform – this may be an opportunity to re-balance.
18. Best Tip of all
Seek advice unique to YOUR business and personal case to review all issues – both go together!
If you need a referral, call me – 0407 361 596 – plan NOW don’t delay!
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Bookkeepers & Business Owners 