It’s that time of the year again that accountants and financial advisors get the most excited about – the end of the financial year! Yes, there are less fireworks compared to the actual end of the year, but it is an important time to ensure that you’ve done your tax planning so that come 1 July, you can start afresh, focus your business’ goals and plan for the year ahead.
We know that tax planning isn’t the most exciting of subjects, but by acting now and following our tips below, you can reduce your tax exposure and maximise the opportunities available to you – and who doesn’t like to save money!
This article is for your business only, but you’ll definitely want to check out our tips on tax planning for individuals and families too.
Your Tax To-Do List:
Pay the June quarter super contributions this financial year if you want to claim a tax deduction in the current year. The next quarterly super payment isn’t due until 28 July 2018. However, some employers choose to make the payment early to bring forward the tax deduction instead of waiting another 12 months.
Don’t forget yourself!
Superannuation can be a great way to get tax relief and still build your personal wealth. Your personal or company sponsored contributions need to be received by your fund BEFORE 30 June to be deductible.
How much can you contribute this year?
This is really important! The super caps have changed over the last couples of years, so don’t assume it’s the same as last year. In the 2017-18 financial year, the contributions cap is $25,000, but make sure you don’t over contribute as you will end up paying tax on excess contributions.
If your turnover is less than $10 Million, you can immediately deduct certain assets (such as equipment, vehicles, etc.) that you purchase and start to use or install ready for use before June 30, provided the asset costs less than $20,000. This is the instant asset write-off that you’ve heard JB Hi-Fi and Officeworks talking about. However, please don’t buy something just for the sake of the deduction – you wouldn’t purchase equipment if cash-flow was an issue, or if it wasn’t going to give you any tax advantage because you have tax losses in your business.
Where possible and where cash flow permits you to, don’t issue any further invoices or chase payment for outstanding invoices until after 30th June. For instance, if you invoiced $20,000 on 30th June, you’ll need to pay tax on the income in the 2018 tax year. However, if you invoice it on 1 July 2018, you won’t need to pay it until the 2019 tax year.
Again, if your turnover is less than $10 Million, you can make prepayments (up to 12 months) on expenses BEFORE 30 June 2018 and obtain a full tax deduction in the 2017-18 financial year (i.e. you could pre-pay your rent, travel, memberships etc.).
To claim a deduction for the 2017–18 financial year, consider paying for any required repairs, office and computer supplies, trade gifts or donations before 30 June.
The purchase of tools of trade and other FBT exempt items for business owners and employees can be an effective way to buy equipment with a tax benefit.
Items that can be salary packaged include handheld/portable tools of trade, computer software, notebook computers, digital cameras, briefcases, protective clothing and mobile phones.
If structured correctly, the employer will be entitled to a full tax deduction for the reimbursement payment to the employee (for the equipment cost), and the employee’s salary package will only be reduced by the GST-exclusive cost of the items purchased.
You should buy these items before 30 June 2018.
Any expected directors’ fees and employee bonuses may be deductible for the 2017-18 financial year if you have ‘definitely committed’ to the payment of a quantified amount by 30 June 2018, even if the fee or bonus is paid to the employee or director after 30 June 2018.
You would generally be definitely committed to the payment if the directors pass a properly authorised resolution to make the payment by year-end. The employer should also notify the employee of their entitlement to the payment or bonus before year-end.
The accrued directors’ fees and bonuses need to be paid within a reasonable time after year-end.
If your company has advanced funds to a shareholder or related party, paid expenses on behalf of a shareholder or an associate or allowed a shareholder or other related party to use assets owned by the company, then this may become a deemed dividend.
The ATO expect that top up tax (if any applies) should be paid by shareholders at their marginal tax rate once they have access to these profits. This is unless a complying loan agreement is in place.
If you have any shareholder loan accounts from prior years that were placed under complying loan agreements, the minimum loan repayments need to be made by 30 June 2018. It may be necessary for the company to declare dividends before 30 June 2018 to make these loan repayments.
As the tax rules in this area can be extraordinarily complex and can lead to some very harsh tax outcomes, it is important to talk to us as soon as possible if you think that your company has made payments or advanced funds to shareholders or related parties.
Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2018.
You should make a record of your odometer reading as at 30 June 2018, and keep all receipts/invoices for motor vehicle expenses. We have an amazing app that we can set up for you called MyProsperity where you can record your trip and save it into your own personal wealth portal (we seriously love this app so contact Kate today to find out more).
If you own a rental property and haven’t already done so, arrange for the preparation of a Property Depreciation Report (Like this one from BMT) to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property.
Neutralise the tax effect of any capital gains on your investments you have made during the year by realising any capital losses – that is, sell the asset and lock in the capital loss. These need to be genuine transactions to be effective for tax purposes.
What’s Changing In 2017/2018?
Single Touch Payroll.
Single Touch Payroll (also known as STP or one-touch payroll) is another piece of ATO red-tape that will require employers with a headcount of 20 or more employees to report salaries and wages, PAYG withholding and superannuation to the ATO each time they process a pay run. Check out our article here for more info on STP.
To Do List
- Ensure you’re Single Touch Payroll ready if you have over 20 Employees.
Review shareholder loan accounts and make minimum loan repayments (may need to declare dividends).
- Pay superannuation to deduct contributions in the current financial year.
- Complete a stocktake where required
- Write off bad debts and scrap any obsolete stock.
- Ensure any inter-entity management fees have been raised.
- Prepare your Trust distribution minutes.
Taxable payments annual report for the building & construction industry due.