Tax Tips for Business
One of the biggest liabilities many businesses encounter is their Tax Bill. Understanding your tax liability before the end of the financial year allows you to take full advantage of the legislation and make sure that you pay the correct amount of tax – no more, no less. So here are my tips for tax time.
There are a number of actions that you may be able to make before the end of the financial year and they all require an assessment of what your situation is and how the legislation impacts on it. Planning before the end of the year allows you to take advantage of these opportunities and carry out the steps required. Once 30 June has passed, your options are reduced.
Structuring plays an important role in ensuring the best outcomes for business. From a business strategy perspective reviewing your structure regularly ensures that it continues to be sufficient for your needs. Using tax consequences to drive your business structure may not provide the best outcomes for the business overall. Prior to year end, considering your overall goals and assessing the impact of your structure on these goals, allows you to determine whether there is a need for a restructure and if so consider the tax consequences and timing of the change.
Capital Gains and Capital Losses
The sale of assets and investments should be reviewed prior to 30 June to determine if any Capital Gains have arisen. Generally, the Capital Gain is derived when the contract is entered into rather than at settlement. In the year that Capital Gains have been derived, it may be opportune to crystalise Capital Losses in the same year to offset the Capital Gain. It’s also important to maintain good records and documentation of the Capital Gains and Losses as the Tax Office may require evidence of these transactions.
Income received in advance of services being provided will generally not be assessable until the services are provided. It may be wise to review your Fees being rendered prior to 30 June, to ensure that you have provided the services being billed.
Disposal of Plant & Equipment
The disposal of items of Plant and Equipment may give rise to a profit from recouped depreciation which would be regarded as Assessable Income. It may be pertinent to consider whether to dispose of the assets in the next financial year. Alternatively a deduction may be available on either the disposal of Plant and Equipment that results in a loss or where the items are not able to be used in business ever again.
Instant Asset Write-off for Small Business Entities
If your business and certain associates have combined gross income of less than $2,000,000 then you may be entitled to an instant write off for depreciating assets that cost less than $6,500. For motor vehicles costing $6,500 or more you may deduct the first $5,000.
A review of Debtors prior to 30 June will identify any bad debts and ensure they are written off before year end.
Obsolete stock may be written off, giving rise to a deduction so it’s necessary to review trading stock prior to year end.
Superannuation Contributions for Employees
To claim a deduction for Superannuation Contributions made on behalf of employees, the physical payment is required to be received by the Superannuation Fund by 30 June.
Loans, payments and debts forgiven by private companies to their shareholders or associates may give rise to unfranked dividends that are assessable to the shareholders or associates. Prior to 30 June, it’s recommended that these loans and payments be reviewed to determine whether any are able to be repaid.
If you use a Family Trust to operate your business, the Trustees or Director of the Trustee are required to meet prior to 30 June to distribute the Income of the Trust. The resolution or minute recording this meeting is required to be signed prior to 30 June.
This article is written prior to the 2013 Federal Budget. When considering taxation in anyway, remember that the Tax Commissioner is ever vigilant and obtain specific advice tailored to your situation.