Year-End Tax Archives - Keeping Company

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.


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


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


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


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


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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year-end tax planning for small businesses

By | External CFO | No Comments

Tax planning strategies for year end

Tax planning and the management of your tax liabilities is crucial to the success of any small business. There are certain strategies that can be implemented before year end to ensure you pay the right amount of tax. Below are some of the common tax planning strategies for small business owners.

1. Defer your income

Consider deferring your sales until July

Consider the timing of billing work in progress
Consider the impact of realising sales of assets that are likely to provide assessable gains
Consider the timing of lodgement and receipt of insurance claims

2. Make Prepayments

Prepayments are entitled to an immediate deduction if you have made <$1000 under a contract of service. For a small business entity (SBE), you can claim a deduction for a prepaid expenditure greater than $1,000 as long as the eligible service period is less than 12 months. For example, you can prepay your rent prior to 30 June 2014 for the 12 months ended 30 June 2015.

3. Evaluate your stock

Make sure you conduct a stocktake before the end of the financial year. Any obsolete stock that is identified should be written off and claimed as a tax deduction. If you qualify as a Small Business Entity (SBE), you do not have to perform a stocktake if you assess that the value of your inventory will not vary by more than $5000 in the tax year. Also, consider the best method to value your trading stock either by choosing cost, sales value or market value.

4. Write off Bad Debts

Ensure that any bad debts are written 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 already paid to the ATO.
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.

5. Disposal of assets

If you are planning to scrap fixed assets, consider realising the disposal before 30 June to ensure a deductible adjustment.

6. Immediate write-off for assets less than $6,500

Assets costing less than $6,500 and purchased before 31 December 2013 can be written off if they are installed and ready for use before 31 December 2013
The Minerals Resource Rent Tax Repeal and Other Measures Bill 2013, designed to abolish the mining tax, also contains provision to write back the deductible amount to $1,000 from 1 January 2014 to 30 June 2014.

This Bill was defeated in the Senate meaning the proposed amendment has not been passed. This leaves SBE in a bit of a pickle as to whether the Government will be able to back date the amendment to 1 January even if it is passed after 30 June.

Accordingly, I urge all small business owners to be cautious in respect to assets purchased after 1 January 2014 costing between $1,000 and $6,500, as an immediate deduction may not be available.

7. Motor Vehicle Deduction

Under existing law, a SBE is entitled to a one-off $5,000 deduction plus 15% depreciation of any additional value for any new motor vehicle purchases. The remaining value of the asset after the $5,000 is allocated to the general pool with a 30% deduction allowed in later years.
As the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 has not passed in the Senate, these motor vehicle rules have provision to be repealed from 1 January 2014.

The normal depreciation rules would then apply from 1 January 2014 and as mentioned above, we urge caution with motor vehicle purchases from 1 January to 30 June 2014 with respect to the deductions available.

8. Make Donations

If you plan to make donations to your favourite charity, ensure you do so before 30 June. Remember, if you are expecting a tax loss, your donations will not be tax deductible in the year paid.

You can choose to spread the tax deduction over a period of up to five income years if it was a gift of money of $2 or more, a property valued at more than $5,000 and a property under the Cultural Gifts Program.

9. Capital Gains Tax (CGT)

You should check whether the 50% General Discount is applicable for any proposed asset disposal (Individual, Trust). You need to satisfy the following basic conditions for Small Business CGT relief:

<$2M turnover
<$6M net assets
Active asset test satisfied
15 year exemption
50% reduction
Retirement exemption

10. Carried Forward Losses

If there are tax losses carried forward from a previous year, ensure that they can be offset this year under the Continuity of Ownership Test (COT) and the Same Business Test (SBT) rules. You should ensure that capital losses are only offset against capital gains.

11. Make Superannuation Contributions

Ensure that all June quarter contributions are paid and received by your Superannuation Fund before 30 June to allow for a tax deduction. Any other outstanding amounts should also be paid before year end.
Ensure that concessional superannuation contributions caps have been maximised. They are:
< 59 years at 30 June 2013 = $25,000 > 59 years at 30 June 2013 = $35,000

These eleven tax planning strategies need to be implemented before year end to minimise your tax liability.

See full article: http://myob.com.au/blog/year-end-tax-planning-for-small-businesses/#ixzz3AGlVWtqd

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