As year end is rapidly approaching, so now is the time to review what strategies you can use to legally minimise your tax. Traditionally, year-end tax planning for small business Entities SBE (Turnover less than $2 million) is based on two simple concepts – e.g. accelerating business deductions and deferring income.
1. Maximising deduction – prepayment – non – SBE:
- expenditure under $1000;
- expenditure made under a “contract of service” (e.g. salary and wages); or
- expenditure required to be incurred under law
- (the prepayments can be a little confusing, so before you commit to making a payment, please contact GJ Solutions for assistance)
2. Maximising deduction – accelerating expenditure – non SBE
possible accelerated expenditure:
- Deprecating assets: costing $1000 or less can be written off in the year purchase. cost less than $1000 can be allocated to a low value pool and deprecated at 18.75% (which is half of the full rate 37.5%) in their first year regardless of the date of purchase.
- Repair – office premises, equipment, cars or other business items;
- Consumables/spare parts
- Client gifts (no entertainment)
- Fringe benefits
- Super (must be paid and received by the fund on or before 30 June 2016. tips: make payment around 20 June to allow process time)
3. Maximising deduction – prepayment – SBE:
- SBE taxpayers make prepayments before 1 July 2016 can chooe to claim a full deduction in the year of paymeny WHERE they cover a period of NO more than 12 months. Otherwise, the prepayment rules are the same as for non-SBE taxpayers.
- theses including:
- Rent on business premises or equipments
- Lease payments on business items such as cars and office equipment
- Interest – check with your financer to detemine if it’s possible to prepay up to 12 months interest in advance.
- Business trips
- Training courses that run within 12 months
- Business subscriptions
4. Maximising deduction – accelarating and Accruded expenditure – SBE:
- Deprecating assets – costing $20,000 or less can be written off if purchased after 12 May 2015 (see more details on my 2015/16 Budget blog)
- Salary wages and bonus , commission
- Director fees
- interest and commercial bills
5. Tools of trade/FBT exempted items: for business owners and employees such as computer, laptop, protective clothing, mobile phone. your should buy these items before 30 June 2016. If structured correctly, the employer will be entitle to a full tax deduction for the reimbursement payment to the employee, and employee’s salary package will only be reduced by the GST- exclusive cost of the items purchased.
6. Concessional Super contribution: the concessional super cap for 2016 is $30,000 (for person age 49 and under) and $35,000 for age 50 and above. DO NOT go over this limit or you will pay more tax (any excessive super contributions will incurred 49% tax ) . Note that employer super guarantee contributions are included in these caps. In order to claim a tax deduction in 2016 year, the super fund must receive the payment by 30 June 2016.
Similar for employees super guarantee contribution, fund must receive the payment by 30 June 2016.
7. Write off Bad Debts and Year end Stock take (Work in Progress): reviewing debtors and write off any that not recoverable as bad debts, reviewing inventory and assets schedules for any disposal, obsolete items and broken items and write off prior 30 June 2015.
8. Motor vehicle log book: ensure you have kept an accurate and completed Motor Vehicle Log Book for at least consecutive 12 weeks period. the start date must be on or before 30 June 2016. You should make a record of the odemeter reading as at 30 June 2016 and keep all receipts/invoices for Motor vehicle expenses.
9. Defer Income / investment income and capital gains:
- Where practical, defer issuing invoices until after 30 June 2016.
- arrange for the receipt of investment income (e.g. interest on term deposits) and contract date for the sale of Capital Gain assets, to occur AFTER 30 June 2016.
- Capital Gains are determined by the date on which a CONTRACT is entered into (not settlement). if you considering selling shares, properties, business, you may wish to delay the contract until the new financial year.
10. Investment property Depreciation: if you have a rental property and haven’t yet had a property depreciation report, please arrange for qualified Quantity Surveyors to prepare a depreciation report to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property.
11. Trustee Resolutions: ensure that the Trustee Resolutions are prepared and signed BEFORE 30 June 2016 for all Discretionary (“Family”) Trusts. Please contact us for more information and these resolutions.
12. Super Stream: are you ready for the new rule about super stream? SBE with <20 employees, will be required to be super stream compliance by 30 June 2016. contact us for assistance.
13. Contractor taxable payment annual report: Business in the building and construction industry need to report the total payments they make to each contractor for building and construction services each year. you need to report these payments to the ATO on the Taxable payments annual report by 28 August each year.