Time to plan for a good finish for EOFY and here are 5 tips to get started and prepare for 30 June.
1. Consider the ideal timing for asset sales
If you are thinking of selling a profitable asset this financial year, but are likely to earn a lower income in the next year, it may be worth postponing the sale until after 30 June, as the sale is income, less the original cost. However, if you expect an income windfall 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!
2. Pre-pay investment loan interest
If you have (or are considering establishing) a geared investment portfolio, you can pre-pay 12 months’ interest on your investment loan and claim the cost as a tax deduction in the current financial year. This can assist to manage cashflow more efficiently, and potentially reduce your income tax liability this financial year.
3. Pre-pay income protection premiums
If you are employed or self-employed, income protection insurance provides peace of mind about the security of your income in the event you are unable to work due to illness or injury. Premiums for this insurance are generally tax deductible; prepaying your annual premium prior to 30 June will allow you to claim a full year of cover in advance as a tax deduction.
4. Review your debtors and creditors
Review your accounts receivable / trade debtors – who is taking the longest to pay – is debt-collection failing – consider if it is simplest to write off (reverse) the sale and move on with more Profitable clients and prospects. Likewise – who do you owe? Can you pay them by end of year to tidy up your accounts – or if you are struggling – can you negotiate longer terms to keep things open with suppliers and keep the relationship going?
5. Offset capital gains with capital losses
Generally, if you have incurred capital losses on your investments, you are able to offset these capital losses against any capital gains you have made. You can also use losses you have carried forward from previous years. Remember, income losses can only be offset against income; capital losses can only be offset against capital gains.
DOWNLOAD a FREE “Bookkeeping Quarter Checklist” to get organised! CLICK HERE
Or ask a question – Email firstname.lastname@example.org or call 0407 361 596 Australia