Tax time ahead?
Your Guide to Effective Tax Planning
Would you like to reduce your home loan? Top up your super? Invest more into growing your business? Even take that holiday you’ve been dreaming about? As the end of financial year rapidly approaches, Vincents invites you to take a minute and imagine what you could do with a minimised tax liability…
Tax planning can help you achieve your personal and business goals – but to be truly effective it is best to plan throughout the year via regular catch-ups with your accountant. If you’re a small business, it’s also particularly important to use these catch-ups to keep up to date with any changes that occur before this financial year comes to a close.
To get you started, here are a few ways to help minimise your business tax for 2017:
1. Benefit From 'Small Business Entity' Concessions
Small businesses have access to a range of ATO tax concessions. Even better, as part of the Government’s ‘Ten Year Enterprise Tax Plan’, the Small Business Entity (SBE) turnover threshold has increased from $2 million to $10 million from 1 July, 2016. Just make sure you qualify as SBE first.
2. Embrace Those Expenses
Spend that money now and take advantage of claiming the deductions this year! Purchase consumable items (these could include marketing materials, consumables, stationery, printing, office and computer supplies) before 30 June, 2017.
3. Make the Most of Deductible Super Contributions
For the 2017 financial year, the concessional superannuation cap is $30,000 for persons under 49 as at 30 June, 2016, and $35,000 for persons aged 49 to 74. Be mindful of this cap so you avoid paying any additional tax.
4. Pay Employee Super Now
To claim a tax deduction for this financial year and maximise your cash flow, make sure your staff superannuation payments are received by the super fund or the Small Business Superannuation Clearing House (SBSCH) by 30 June, 2017.
5. Make a Call on Those Bad Debts
A deduction can be claimed for a bad debt when a genuine commercial decision has been made that the debt is no longer recoverable. With this in mind, prepare a management meeting document detailing each bad debt and enter them into your accounting system before 30 June.
6. Carry Out Repairs & Maintenance Now
Does your business need any repairs and maintenance (business, rental property, employment)? Do these before 30 June in order to claim deductions.
7. Take Advantage of the Reduction in Company Tax Rates for Small Business
The company tax rate for businesses with less than $10 million turnover is predicted to ease from 28.5 percent to 27.5 percent for the 2017 financial year.
8. Review Your Assets and Claim Instant Deductions
When did you last review your asset register? If your business is a SBE (point 1), you are entitled to the following tax concessions:
- Depreciating assets <$20,000 are automatically deductible;
- Depreciating assets >$20,000 will be depreciated altogether at a rate of 15 percent in the first year and 30 percent for future years; and
- If your total balance at the end of the year is less than <$20,000 before applying any other depreciation deduction, the entire balance is deductible.
If your business is not a SBE, all assets purchased over $300 should be depreciated and all assets $300 or under should be deducted.
9. Manage Your Capital Gains & Deer Investment Income
Instead of selling any investments or capital assets this financial year, try to arrange for the receipt of your Investment Income and the contract date for the sale of any capital gains assets to occur next financial year. This way you will avoid incurring the tax liability.
10. Stay on Top of Your Motor Vehicle Log Book
Are you set to receive the best tax deductions for your motor vehicle this year? Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. Gone are the days where you need a manual log book in the glove box, filled out after every trip and a car floor full of petrol receipts! There are a range of smart phone apps that satisfy the requirements of the ATO.
11. Depreciate that Investment Property
Do you own any rental properties? Arranging a Property Depreciation Report means that you will be able to claim the highest amount of depreciation and building write-off deductions on your rental property.
12. Stocktake Time
Compile a comprehensive stocktake listing as at 30 June, 2017 (if this applies to your company). Review and write-off any obsolete or worthless stock items.
13. Small Business Concessions - Prepayments
‘Small Business Concession’ taxpayers can pre-pay for up to one year on expenses (like loan interest, rent and subscriptions) before the end of the financial year and benefit from a full tax deduction in the next year. Talk to your accountant about how the proposed changes to the tax rate of SBE companies could make prepaying expenses a great saver of tax now as opposed to next year.
Finally, sit back and really take the time out to reflect on your business. Did you perform like you wanted to? If not, what do you think could be changed for next financial year? Set some goals and consult with your business advisor to really gain insight and take control of your outcomes!
Vincents specialises in business advisory, assurance and risk advisory, forensic services, financial advisory and corporate advisory, insolvency and more. See more at vincents.com.au.