Tax Planning for Businesses: 12 Tips and Tricks for Year Long Joy
We cannot believe that it’s that time of year again! June 30 always comes around so quickly, so with the end of financial year fast approaching we have compiled our EOFY tax planning tips, changes and to-dos.
We realise tax planning isn’t the most exciting of subjects – but it is important to ensure you reduce your tax exposure and maximise the opportunities available to you.
This article is for our business clients. Check out our tax planning for individuals and families too.
12 Tax Tips
1. PAY THE JUNE QUARTER EMPLOYEE SUPER EARLY (AS IN NOW).
Pay 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 2016. 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 the fund before 30 June to be deductible.
How much can you contribute this year?
If you were under 49 on 30 June 2015, then you can contribute up to $30,000. For those aged 49 – 75 you can contribute up to $35,000. Make sure you don’t contribute over these limits as you will end up paying more tax.
2. BUY SOMETHING USEFUL (ASSET PURCHASES).
If you turnover less than $2 Million, you can immediately deduct equipment, vehicles etc. (assets) you start to use or install ready for use, provided the asset costs less than $20,000. However, please don’t just buy something for the sake of the deduction. For instance 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.
3. DON’T SEND THAT INVOICE…
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.
4. PREPAY STUFF UPFRONT.
Again, if you turn over less than $2 Million, you can make prepayments (up to 12 months) on expenses (e.g. Loan Interest, Rent, subscriptions) BEFORE 30 June 2016 and obtain a full tax deduction in the 2016 financial year.
5. BRING FORWARD REPAIRS, GIFTS, DONATIONS OR CONSUMABLES.
To claim a deduction for the 2015 – 16 financial year, consider paying for any required repairs, office and computer supplies, trade gifts or donations before 30 June.
6. BUY NEW TOOLS OF THE TRADE FOR YOUR STAFF.
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 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 2016.
7. WRITE-OFF BAD DEBTS.
To be a bad debt, you need to have brought the income to account as assessable income, and given up all attempts to recover the debt. It needs to be written off your debtors’ ledger by 30 June. If you don’t maintain a debtors’ ledger, a director’s minute confirming the write-off is a good idea.
8. CALCULATE DIRECTORS’ FEES AND EMPLOYEE BONUSES.
Any expected directors’ fees and employee bonuses may be deductible for the 2015-16 financial year if you have ‘definitely committed’ to the payment of a quantified amount by 30 June 2016, even if the fee or bonus is paid to the employee or director after 30 June 2016.
You would generally be definitely committed to the payment by year-end 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 period after year-end.
9. DECLARE DIVIDENDS TO PAY ANY OUTSTANDING SHAREHOLDER LOAN ACCOUNTS.
If your company has advanced funds to a shareholder or related party, paid expenses or allowed a shareholder or other related party to use assets owned by the company, then this can be treated as a taxable 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 2016. It may be necessary for the company to declare dividends before 30 June 2016 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 your company has made payments or advanced funds to shareholders or related parties.
10. KEEP A MOTOR VEHICLE LOG BOOK.
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 2016.
You should make a record of your odometer reading as at 30 June 2016, and keep all receipts/invoices for motor vehicle expenses. Check out the ATO’s app myDeductions or the LogitFleetcare app.
11. ARRANGE A PROPERTY DEPRECIATION REPORT.
If you own a rental property and haven’t already done so, arrange for the preparation of a Property Depreciation Report to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property.
12. REALISE ANY CAPITAL LOSSES AND REDUCE GAINS.
Neutralise the tax effect of any capital gains 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. It may be possible to contribute assets with unrealised losses to superannuation in order to do this.
What’s Changing In 2016/2017?
SUPERSTREAM – ELECTRONIC REPORTING AND PAYMENT OF EMPLOYEE SUPER CONTRIBUTIONS
All businesses, regardless of size must be compliant with SuperStream. This date has been extended from 1st July to 28 October 2016. All employers must electronically report and pay super contributions for employees through a system that conforms to the SuperStream requirements or an external provider. The ATO’s free Superannuation Clearing House, Xero premium plans, MYOB’s PaySuper, Quickbooks Online Payroll, all offer SuperStream compliant services. Check out our article on SuperStream and what you need to do to be compliant.
NEW RULES TO MAKE BUSINESS RESTRUCTURING EASIER.
New rules from 1st July 2016 mean that small business can now restructure their business operations without triggering adverse tax implications – for example moving from a Trust to a Company is now possible without triggering any taxes. We will be writing more on this subject in the future, but give us a call if you want to discuss your particular situation.
To Do List
Pre June 30
• Ensure you’re SuperStream ready.
• 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.
14 July (on or Before)
PAYG Payment Summaries provided to all of your staff.
Unless prepaid before June 30, quarterly super guarantee payment due (1 April – 30 June).
Annual PAYG Payment Summary lodged with the ATO. Penalties apply for late lodgement.
Taxable payments annual report for the building & construction industry due.
SuperStream compliance deadline extended until 28 October.
15 May 2017
Tax Returns due (we will contact you if your return is to be submitted earlier).