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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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Common tax minimisation strategies for small business

By | Tax Advice & Planning | No Comments

It’s tax planning time! If you’re a small business owner you don’t want to have to pay more tax than you have to. The following tips will ensure you get the most bang for your buck come tax time.

1. Take advantage of the $20,000 immediate asset write off

Unless you have had your head in the sand for the past month, you would know that the Federal Government announced in the budget released on 12 May 2015 that all eligible small businesses would be entitled to an immediate deduction for asset purchases costing less than $20,000. This measure replaces the $1,000 threshold which was in existence up to the announcement and will be in existence until 30 June 2017.

You will need to ensure that the assets are installed and ready for use by 30 June 2015 in order for the deduction to be available for the 2015 financial year. If you do not require any assets or haven’t got the cash flow to afford them before year end, it is really important to remember that you are able to write off the balance of any small business pool with a written down value of less than $20,000 and get an immediate deduction!

You will need to ensure that your assets are eligible assets as, for example, capital works are not subject to the simplified depreciation rules and are subject to different rates, which are much less than the general pool and immediate write off.

2. Maximise superannuation contributions

As a small business owner, you should be planning for your future, and that means superannuation. The concessional cap from 1 July 2014 is $30,000 for all individuals unless you were 49 years of age or older on 30 June 2014 which means your cap is $35,000. When maximizing the concessional contributions you need to remember that the limit includes your compulsory 9.5% and that all payments must be received by the super fund prior to 30 June.

3. Make Prepayments

If you have the available cash, making prepayments is a no-brainer. Businesses are entitled to a deduction for prepayments made for greater than $1,000 as long as the eligible service period is less than 12 months. You may consider prepaying a portion of rent or interest on borrowings. Prepayments under $1,000 are deductible regardless of the service period.

4. Consider the timing of Capital Gains Tax events

If you are trading as an individual or through a trust you should check whether the 50% General Discount is applicable for any proposed asset disposal. This requires that you have held the asset for at least twelve months. This means that you need to consider the timing of the disposal.

In addition you may be entitled to further small business concessions and discounts, such as Active Asset or Rollover relief. If you are considering the disposal of an asset, you would be wise to contact your tax adviser so that they can help you to understand the consequences of the transactions and the concessions that may be available.

5. Write off those bad debts that will never be collected

If you are an accruals basis taxpayer and have bad debts, you should consider writing them off before 30 June to ensure a tax deduction is claimed in the current year. If you pay your GST on an accruals basis, any bad debt adjustment is likely to result in a refund of GST that has already been paid on a previous BAS. When writing off bad debts, make sure you follow the rules to ensure that the debt is bad and that the necessary steps have been followed to collect the debt.

6. Write off obsolete stock

Make sure you conduct a stock take before the end of the financial year. Any obsolete stock that is identified should be written off. This will reduce your tax liability.

Improve your tax planning this end of financial year with MYOB AccountRight online accounting software, it’s the power to manage business, your way. For further information or assistance with setting up or upgrading please contact Keeping Company on 1300 533 787.

By Ryan Miller on 17th Jun 2015.  Read the full article here.

The information provided here is of a general nature for Australia and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’s circumstance will vary for end of financial year.
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