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Here are 30 ways to maximise your benefits before the end of the financial year. With only a minimal time left to the end of financial year, it is time to take action
If you earn up to $37,000 you may also get a ‘low income super contribution’ of up to $500 from the government. You will get this benefit as long as you contribute $1000 into super in a tax year. The government will automatically make these payments, if you meet the criteria, once your tax return is lodged. Low-income earners should think about making a personal superannuation contribution so that they qualify for the government’s superannuation co-contribution payment.
Make sure that you don’t contribute more than the annual concessional contribution cap of $30,000 if your under 50 years old and for individuals 50 and over, $35,000. There are penalties if you exceed the caps. Taxpayers are often brought undone by forgetting salary sacrificed superannuation while also contributing to an industry fund.
Next year the contribution cap will be $25,000 for all individuals.
Give to Charity
Have you been putting off giving because you haven’t had time or not sure what charity to give to? A deduction to a registered charity over $2 is claimable. If you are unsure of what to claim or what organisation to give to, we have strategic alliances and are always happy to provide guidance. If you need more help regarding giving to a charity, give us a call on 03 9848 5933.
It is important before you lodge your tax return all income is distributed. If you are using a good accountant, it is their job to ensure this happens otherwise undistributed income may be taxed at 46.5%.
Make sure you have a good lawyer put together your trust deed. What income is considered swings on the wording of your trust deed as the deed dictates how trust income is defined and whether capital gains are treated as normal income or not.
There are three types of assessable income in a trust accounting income, distribution income and trust income and again, it comes down to the wording of the trust deed to how the income is counted and considered. Recent tax law resolved that the distribution of the taxable income must align proportionately with the distributions made for the accounting income. This can create a problem if you want to limit the income of some beneficiaries to a set dollar amount eg: children under 18.
This seems pretty logical to us, but you can’t claim a distribution to a beneficiary unless they have received the benefit. If you can, you should pay the entitlements back before you lodge the trust’s income tax return.
Check to see if your company has any tax losses carried forward from prior years. These will be able to be offset against this year’s income. Certain deductions cannot be used to contribute to a loss. A tax loss is different from a capital loss. You’ll need to make sure that the company passes either the Continuity of Ownership or the Same Business tests.
If you or any of your associates have received a benefit, had a debt forgiven or borrowed money from your company or trust then Division 7A rules may apply to you. Contact us if you need to clarify the details of the Division 7A rules. Companies are allowed to make loans or payments to their shareholders or associates (or even forgive debts). There are onerous tax consequences however unless the loans are put on a legitimate footing with proper loan agreements with interest being charged, principal repayments made and, in some cases, genuine security taken. Alternatively, the loan can be repaid by the earlier of the due date for lodgement of the company’s return for the year or the actual lodgement date. It’s important to get some good tax advice or suffer the tax consequences.
If you have a number of smaller entities, you may want to consider consolidating them for tax purposes before the end of the year. The resultant single tax entity allows you to offset profits and losses from the different entities. Also the cost of doing tax returns may be cheaper as well.
The company tax rate on income is currently 28.5%. Individual tax rates can be much higher. If you provide services through a company where those services are virtually all from your personal exertion, you could find that the income will be considered to be all yours and not the company’s. Some common examples include financial professionals, information technology consultants, engineers, construction workers and medical practitioners. It is important to check with us as there are some clarification questions to go through.
You should consider the availability of other small business CGT concessions which have the effect of reducing or deferring a capital gain arising from the disposal of a business asset.
The Capital Gains Discount is only available when you sell an asset that you have held for less than 12 months. Consider deferring the disposal of these assets until the 12 months threshold has past.
If you have sold an asset within a business, there may be ways of contributing to Super to legally reduce your tax liability. In some circumstances you can avoid paying tax on capital gains if you use some or all of the funds to make a personal superannuation contribution.
CGT law allows you to roll over a capital gain into a replacement asset, effectively deferring the tax on the gain.
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.
Slow moving Stock
Slow moving stock can be written down to net realisable value.
Business and Work Deductions
If you 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 have paid your GST on an accruals basis (contact us if you wish to clarify what this means) , any bad debt adjustment is likely to result in a refund of GST. 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.
Any effective life determined to be still existing within the assets has a value, and the value becomes an immediate write-off when the item is scrapped. Review your asset ledger and write off all assets that have been scrapped or which have outlived their useful economic lives.
This question is about claiming a deduction for the decline in value of low-cost and low-value assets you used in the course of producing income you show on your tax return, by allocating them to what is called a low-value pool. Assets which have been written down to where their value is quite low can be pooled together and depreciated at a higher rate.
Once you choose to allocate a low-cost asset to a low-value pool, you must allocate to the pool all other low-cost assets you hold in that year and in future years. Assets costing $300 or less can be written off immediately under certain conditions.
If your turnover is less than $2M you do not have to perform a stock take if you assess that the value of your inventory will not vary by more than $5000 in the tax year. One reason to come and see one of our experienced accountants is to make sure you choose the best method to value your stock. The options are cost, sales value or market value. We can help you decide what method is best for you.
The work car is due for a service or some new tyres, why not get it done pre-June rather than just after? For the sake of paying a few days earlier you accelerate the effect of the tax deduction by a whole year earlier.
Superannuation is only deductible to the business when it is paid on time. This will help avoid the Superannuation Guarantee Charge. It is advisable to ensure that the superannuation liability relating to the June 2017 quarter is paid before year end as this will ensure a full deduction.
If there are other outstanding payments from previous months these need to be paid and in your team member’s superannuation account by the 30th of June. You should also ensure that the Superannuation Guarantee Charge forms are lodged for overdue payments. If you need help with this, please do not hesitate to call 03 9848 5933 .
You can claim a deduction for personal superannuation contributions if your salaries and wages income is less that 10% of your total income.
You may be able to claim a deduction for self-education expenses if your study is work-related. If you wish to clarify this, give us a call on 03 9848 5933
If you are an accruals basis taxpayer your income will be derived in the year in which you issue an invoice. If you are unsure which one you are it is important to speak to us. Determine whether you should use “Cash” or “Accruals” tax accounting. On the cash basis, taxable income is the net of amounts that are actually received less amounts actually paid at year end. The proceeds of pre – 30 June sales which have not yet been received, are excluded from income for the current year.
Make sure that you exclude any income that you may have invoiced but not yet earned. Defer the income until the next year. This can be income you have invoiced when you have not received payment yet.
This is a balancing act between when clients want you to invoice and if you have sufficient cashflow to delay invoicing. If possible, think about deferring your invoicing until after 30 June. A one month delay in billing will mean you pay tax on the income a whole year later. Some might want you to bill pre-June so that they can claim the deduction. And a few days delay in billing will usually mean that you get paid a whole month later.
For most taxpayers interest is only assessable when actually received. If you are lucky enough to have a few term deposits, arrange to have them mature after 30 June rather than just before.
You are receiving this email because you opted in at our website. Readers are encouraged to consult their adviser for advice on specific matters. This information (including taxation) is general in nature and does not consider your individual circumstances or needs.
It is important to make sure these strategies work for you. If you are unsure or want toclarify which strategy would be best, give us a call.