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Tax Tips for the end of financial year
Jennifer Palmer - May 2019
It’s that time of the year again! If you haven’t started tidying up your financial affairs before the end of the financial year, you’d better get cracking. Here are some tips to help you get started.
Instant Asset Write Off
Small Business Entities with turnover less than $10million
Instant asset write off if asset acquired;
o1 July 2018 – 28 January 2019 and costing less than $20,000
o29 January 2019 – 2 April 2019 and costing less than $25,000
o2 April 2019 – 30 June 2019 and costing less than $30,000
Medium Business Entities with turnover between $10million and $50million
Are eligible to utilise the instant asset write off for assets costing up to $30,000 if purchased and installed between 2 April 2019 and 30 June 2019.
Pay all employee super before 30 June 2019, including the June 2019 quarterly contributions. As tax deductions are only allowed when the payment is made, pay well before 30 June so you can claim it as a tax deduction in this financial year. Remember, all compulsory contributions are due no later than 28 days after the end of each quarter, but you only get a tax deduction when paid.
The cap for concessional super contributions is $25,000 for everyone regardless of age. This cap includes the 9.5% compulsory contributions as well as salary sacrifice contributions.
Employees can now claim a tax deduction for personal contributions up to the cap inclusive of employer contributions.
Investors and self-employed can claim a tax deduction on personal super contributions up to the cap.
Investors over 65 years of age cannot claim super contributions unless they meet the work test.
Payments must be made to your fund no later than 30 June 2019. Don’t leave it until the last day, because if your fund receives it on 1 July, it will count towards next year’s contributions cap.
Make sure any contributions you make before the end of financial year are within the contribution caps, so you don’t pay a penalty tax.
The limit for non-concessional contributions is now $100,000 per annum with the ability to bring forward two years contributions if you are under age 65 years. If you are aged between 65 and 75 years, you can only make a $100,000 per annum contribution if you satisfy the 'work test'. This rule also depends on your total superannuation balance.
The above is general information and you should seek advice before making super contributions.
Write off any bad debts before 30 June 2019. This means going through your debtors list and either collecting payment, taking action or writing it off. Debts should be written off when there is no chance it will be recovered. The debtor must be removed from your accounts receivable list to be eligible for a deduction.
If you account for GST on an accruals basis, you can make a GST adjustment when the debt is written off and claim back the amount of GST previously paid on the invoice.
Do any spending you would need to do anyway, such as buying stationery, servicing vehicles, repairing equipment, printing, advertising and company uniforms and claim a tax deduction this year.
Pay for any business expenses in advance such as subscriptions and insurance if you are a small business. The maximum prepayment is 12 months to 30 June 2020.
For assets costing $300 or less, you can claim an immediate deduction for this cost if you used the asset for a taxable purpose during the income year in which the deduction is available. You can't do this if the asset is part of a set of assets that together cost more than $300. For example, if you buy four dining chairs each costing $250 for your rental property, you can't treat them as separate assets to claim an immediate deduction.
You are eligible for a tax deduction if you prepay expenses such as interest, strata levies and insurance.
Document monies you have received for deposits on work yet to be completed, as it’s not taxable this financial year. Record as income in advance.
Identify any invoices you have issued for sales that will take place next financial year, so the income and tax is deferred until then. Record as income in advance.
If you have receivables that are more than 12 months old and you report GST on an accruals basis, you can claim the GST back on your BAS, even though you have not written the debt off as bad.
If you have creditors that are more than 12 months old, you must repay the GST previously claimed.
Review your depreciation schedule and write off any obsolete or scrapped plant and equipment—you’ll receive a deduction for the written-down value.
For small business entities, assets that are not eligible for instant asset write offs will continue to be deducted over time using the small business pool. If the pool of assets is less than $20,000 at the start of the year, the full amount can be deducted.
It’s a good time to review the structure you’re working under, to make sure it’s the best option for asset protection and flexibility for the distribution of profits in the most tax-effective manner.
If you need some help with your tax planning before the end of financial year, we’d love to help. Contact us online or call 02 9526 1211.