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June 2017

End of Year Tax Planning 2017

By | Business Bookkeeping Services, External CFO, Tax Advice & Planning | No Comments

With 30 June fast approaching, now is the time to consider your year end tax position. We have compiled the following list of items to assist in the year end tax planning process.

We are always available to answer any queries.

INCOME

Deferral – You may be able to defer sales from the 2017 year to the 2018 year or bring forward sales into the 2017 year in appropriate circumstances
Company Tax Rate – Small Business Entities now include companies with turnover of under $10 Million and will be taxed at 27.5%
Unearned Income / Income In Advance – You should consider whether any income received is in advance of the goods or services being supplied and can therefore be taxable in a future year
Construction Contracts – The ATO allows construction contract revenue to be recognised under various methods and may impact when the revenue is taxable. The application of the different methods must be consistently applied
Interest and Dividends – Income is generally booked as revenue when received. If you have received a loan from a related company or trust you should consider whether a Division 7A dividend is likely to be paid
Personal Services Income (PSI) – If you provide services by yourself through a company or trust it is likely that you have derived PSI and any profits will be attributed to you directly

EXPENSES

Deductibility – You should check whether any expenses incurred during the year may not be deductible
Capital – SBE’s are entitled to an immediate deduction of all assets costing less than $20,000 excl GST, these assets should be bought and installed before 30 June 2017. Any assets over $20,000 will be depreciated in a pool at 15% for the 1st year and 30% for each year after. A pool balance of less than $20,000 can also be written off
Bad Debts – if you write off doubtful debts before 30 June you will be entitled to a tax deduction. You should consider whether you have made all necessary attempts to collect before writing off
Trading Stock – You should perform a stock take to ensure the correct gross profit is being taxed. As an SBE if your inventory movements is under $5,000 each year you are not required to perform a stocktake. You can choose to value your year-end stock as cost, market value or obsolete value
Employee Bonuses – If you are paying bonuses you should ensure that you are committed to paying them before 30 June and some documentation should be kept
Prepayments – As an SBE prepayments that have a period prepaid of 12 months or less are entitled to an immediate deduction

COMPANIES

Super Payments – Make sure all super payments are made and received by the Super Fund before 30 June 2017 to ensure deductible in the 2017 financial year
Maximise Deductible Super Contributions – The concessional cap for the 2017 year is $30,000 for persons aged under 49 at 30 June 2016 and $35,000 for persons aged 49 to 74, so you should consider maximising your contributions. Remember that your 9.5% is counted toward these caps. The cap drops to $25,000 per year for all ages from 1 July 2017
Division 7A Loans – You should review loans before year end to ensure you don’t accidentally trigger a debt forgiveness, deemed dividend etc and arrange a loan agreement with the company
Payment of Dividends – If you plan to pay a dividend or have paid a dividend you need to ensure the payment is allowed as well as documenting it via a Director Minute

TRUSTS

Trustee Resolutions – You should prepare a resolution or distribution plan before 30 June 2017 or earlier depending on your Trust Deed considering all types of income such as dividends, other income, capital gains. This will help to ensure income is not taxed at 49%
Meaning of Income – You should consider the definition of Income as per your Trust Deed to ensure your resolutions are effective in the distributions
Trust to Company Distributions – If these exist you need to consider Division 7A and whether all payments have actually been made to avoid any Unpaid Present Entitlements (UPE)
Family Trust Elections – You should review FTE requirements to ensure that franking credits can flow through and protect bad debts and carry forward losses
Trust Deed – Consider reviewing your Deed to ensure it is appropriate for the proposed distributions

CAPITAL GAINS

Timing of CGT Events – You should consider the timing of a capital gains tax event in respect to which financial year the event falls into noting that contract dates and not settlement dates are generally when the event occurs
Small Business CGT – Consider your ability to reduce any capital gains by applying the concessions
CGT Discount – Where assets are held for more than 1 year they may be entitled to a 50% discount on any CGT payable

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