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Business Tax Tips – 14 End of Financial Year 2017 tips to PREPARE for 30 June! Time to ACT NOW!

Business Tax Tips – 14 End of Financial Year 2016 tips to PREPARE for 30 June! Time to ACT NOW!

14 End of Financial Year 2016 tips to PREPARE for 30 June! Time to ACT NOW!

Time to plan for a good finish for EOFY and here are 14 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; however, if you expect an income windfall or higher from 1 July, it may be worth bringing the sale forward. As always, your decisions depends 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! Ask your Tax advisor.

2. Delay sales invoicing if in profit

Most businesses are taxed on income when it is invoiced (accrual). Some small businesses may be taxed only when income is received (cash basis). Income from construction contracts is generally taxed when progress payments are invoiced or received. If you are making a good profit (which is good if you want to sell) and want to reduce business tax, it may help to delay invoicing the June work until July, after 30 June – talk to your tax advisor for your situation.

3. Accounts receivable – write off by 30 June

If you have clients that have closed or all manner of collection has failed – sometimes it is best to move on and write off. Keep looking for better clients!

4. Spouse and family wages

Paying family must be reasonable and legitimate for work performed.

5. Super liabilities

Employer and/or self-employed superannuation contributions must be paid to, and received by, the super fund before 30 June and must be within the contributions cap ($35,000 for individuals aged 49 or over on 30 June 2016, otherwise $30,000)

6. Depreciation – Accelerated Write off – up to $20,000

The accelerated depreciation write-off for assets up to $20,000 acquired by small businesses was announced in the May 2015 budget and is available to June 30, 2017. The write off threshold was previously $1,000 and the concession only applies to businesses in 2016/17 with an aggregate annual turnover of less than $2 million. As a boost for small businesses, the Government will extend access to a number of small business tax concessions by increasing the annual turnover eligibility threshold from $2m to $10m. These measures will apply from July 1, 2016.

7. Pre-pay income protection premiums 

If you are a self-employed director 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.

8. Get a super top up from the government

If you earn $35,454 – $51,021 pa, of which at least 10% is from employment or a business, and make a personal after-tax super contribution, you could qualify for a Government co-contribution of up to $500. 

9. Boost your partner’s super and reduce your tax

If you have a spouse who earns less than $10,800 pa, consider making an after-tax super contribution on their behalf, and you could receive a tax offset of up to $540.

10. Use super to manage capital gains tax

If you make a capital gain on the sale of an asset this financial year and earn less than 10% of your income from eligible employment, 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 and meeting the work test (2017 now abolished), and be comfortable having your contribution preserved in super until you meet a condition of release (eg retirement decision).

11. Make tax deductible super contributions

If you earn less than 10% of your income from eligible employment (eg you are self-employed or not employed), you are generally able to claim a tax deduction for personal contributions to superannuation. As with super, you will need to be eligible to contribute to superannuation (which means you are under the age of 65, or under 75 and meeting the work test), and be comfortable having your contribution preserved in super until you meet a condition of release (eg retirement). 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 and 15% – which could be up to 34%.

12. Review your portfolio

Review your portfolio and consider a strategic re-allocation of your investments. Consider portfolio allocations – is your portfolio heavily over- or underweight in specific 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. If you have an SMSF, now is the time to ensure your fund is invested in line with your documented investment strategy – your auditor will be confirming this after 1 July.

13. 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.

14. Best tip of all

Get advice specific to your business and situation that considers your personal position – both go together!

If you need a referral, call me – 0407 361 596 – plan NOW don’t delay!

Need help? Not sure? Call for FREE 30min advice / strategy session today!

Call 0407 361 596 Aust and also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!


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Year End Business Tax Planning Tips

Nearing the end of the tax year at 30 June, there are several things to consider and watch

  • Record Keeping – normally required to be retained for tax purposes for at least five years, but special requirements apply in some areas.  For example, in the case of capital gains tax and the substantiation rules, records have to be held for longer periods.
  • Stock on Hand – It’s not sufficient to simply make an estimate of your stock, or to take a guess.  Each year you need to include a value in your accounts of stock on hand and work-in-progress at 30 June. Closing stock can be valued at cost, replacement or market value or less if obsolete, but you have to document which method you use.
  • Personal Services Income –  designed to limit the level of deductions available to certain contractors whether they are operating as a sole trader or through a company, trust or partnership, and to also extend the PAYG withholding rules in such cases. If you meet certain specified tests such as the ‘results’ test will be treated as carrying on a personal services business and will be able claim a wider range of deductions.  But be aware of the ATO‘s strict approach to income retention and income splitting (with some exceptions such as for standard ‘mum and dad’ partnerships).
  • Superannuation – must ensure they have made sufficient superannuation contributions (9 per cent) for all employees on a quarterly basis throughout the financial year to avoid the risk of incurring a penalty under the Superannuation Guarantee Charge (SGC) regime.
  • Dividends and Interest  – Ensure that interest and dividends are returned by taxpayers, the Tax Office matches information provided in tax returns with information from external sources. And remember to put in your imputation credits. The best way to avoid trouble here is to include all such income in your return and retain supporting documents such as bank and company dividend statements.

To Be Continued