The end of the financial year is the time for a final review of your tax affairs for this year and to do your tax planning for the new financial year. It is no longer acceptable to do last minute tax manipulation when you prepare your income tax returns after the year end. Tax and the flow of tax payments need to be planned well in advance so that they do not look like deliberate actions to avoid tax. It is also a good time to review your financial objectives and challenges and to ensure you understand the tax implications of key business decisions under consideration.
There’s still time to implement tax planning before the EOFY
And with two months to go, there’s still time to implement tax planning strategies before the 30th June to reduce your tax exposure before the year end. It is time to do your housekeeping. Bad debts must be written off or you can’t claim them as a deduction. Obsolete stock must also be scrapped or disposed of as is worthless plant and equipment before 30th June. Keeping it in the basement or at the back of the yard is not good enough. Investments that are showing a loss and no longer form part of your investment strategy should be disposed of so that you can offset the loss against any realised capital gains. You can also ensure that you make any necessary repairs before the 30th June.
$20,000 immediate asset deducatbility for small business
There is also a nice bonus for small businesses besides having a slightly lower tax rate. If a small business purchases a depreciable asset for less than $20,000 then it can be written off this year instead of being depreciated over its useful life. We do not recommend spending up to $20,000 on an asset unless it is genuinely required by your business At first glance this sounds like a valuable concession but there’s a list of qualifying conditions. Even “what is a small business” has a complex definition. The ATO have made it clear that they will be monitoring the use of this concession to ensure that the write off rules are being adhered to.
Superannuation and SMSFs
Superannuation has some serious planning issues at the 30th June. In order to get a tax deduction for a contribution either for yourself or an employer for their team, the contribution must be received by the super fund by the 30th June. The “cheque is in the mail” does not work and you need to take care with internet banking as showing that you paid it a 11.59pm on 30th June is not good enough. Remember some financial institutions take a couple of days to get the money to a recipient. If you are in pension phase then there are also timing issues. A minimum pension payment MUST be made each year. If you are in a Transition to Retirement Pension, then you must not exceed the maximum. Care must also be taken to ensure that you do not exceed either the concessional (tax deductible) or non-concessional (non-deductible) contribution caps. 30th June 2016 is also the deadline to fix the issue with art work and collectibles in a Self-Managed Super Fund.
These are only a few tips to minimise the tax you have to pay, but they do not take into account your individual objectives, financial situation or particular needs. Talk to us or your financial advisor before you act.