6 Tax Tips for End of Financial Year
It’s tax time! What can you do now to reduce the taxable income for you and your business?
Here are a few ideas…
- Depreciation of AssetsThe rules for depreciation of business assets are generous but due to be scaled back after 30 June this year. Under current rules business assets bought forward or financed under $20,000 can be written off in 2017/18 in full rather than claimed over many years.We recommend that if you need to buy some equipment or gear for your business then do it prior to the end of June.
- SuperannuationThis is a great option for minimising tax because:
- The tax rate for Superannuation contributions (15%) is less than the company tax rate and most personal tax rates.
- Contributing to your super is providing for your future as a nest egg.
Please note that a contribution needs to be received by the Fund by 30th June 2018 to be tax deductible this year.
- Bad Debts
We recommend that bad or doubtful business debts be written off prior to the end of June 2018. Please note that if an invoice is subsequently paid in whole or in part then it shall be income at that time (bad debt recovered).
- Income Splitting/Structuring
There can often be differences in effective marginal rates of tax between spouses. With the continued fall in company income tax rates there are real tax savings to be made by carefully structuring your business and attributing net business profits between entities/people as well.
Please contact us for more detailed explanations of the rules and rates.
- Prepayment of Expenses/Deferral of Income
If you recognise that your business is largely seasonal and that you have had a particularly good year for 2017/18 please consider how expenses could be prepaid in 2017/18 for the rest of the year. (E.g. rent, insurance) and how income could be deferred to 2017/18.
- Capital Gains Tax (CGT) Planning
There are generous CGT concessions for smaller businesses. CGT is applicable to realised gains. Such gains are recognised in the financial year that a contract is signed rather than when settlement occurs.
- As CGT applies to the income year that a contract is signed, deferral of a contract settlement generally does not defer the CGT liability.
- CGT can be deferred if signing of the contract for an asset sale is deferred until after 1st July 2018.
CGT is reduced if:
- The asset is disposed of with the gain held more than twelve months. Assets disposed of at a loss are sold in the same financial year as an asset with a gain.
So, now that it’s tax time, make sure your finances are working for you rather than against you…and before the end of financial year!
Please talk to us to find out more on any of the above strategies for minimising your tax.