Updated: May 21, 2020
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
Business entities with a turnover of less than $500 million using simplified depreciation
Eligible for immediate deduction for depreciating assets costing less than $150,000 installed ready for use on or after 12 March 2020, but prior 1 July 2020.
Applies to new and second hand assets.
Normal depreciation cost limit applies for cars designed to carry less than one tonne or fewer than nine passengers ($57,581 for the 2019-20 income year).
Small business entities with a turnover of less than $10 million using simplified depreciation
The threshold reverts to $1,000 from 1 July 2020.
If your general small business pool of depreciable assets is less than $150k at 30 June 2020, the entity can claim a deduction for the entire balance.
Accelerated depreciation rules
Applies to new assets costing $150k or more, acquired between 12 March 2020 and 30 June 2021.
If entity is using simplified depreciation then can claim 57.5% of the cost in the first year.
If entity is not using simplified depreciation rules then can claim 50% of the cost in the first year, with the balance of cost depreciated at the normal rates.
Pay all employee super before 30 June 2020, including June 2020 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 up to 75 years of age. This cap includes the 9.5% compulsory contributions as well as salary sacrifice contributions.
Employees can 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.
Payments must be made to your fund no later than 30 June 2020. 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. Allow for timing delays in receipt of funds.
Make sure any contributions you make before end of financial year are within the contribution caps, so you don’t pay a penalty tax.
The limit for non-concessional contributions (NCC) is now a $100,000 per annum with the ability to bring forward two years contributions if you 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’. You are not allowed to contribute NCC if your members balance is greater than $1.6m.
Pension payments from your Super Fund are reduced to 50% of age-based requirements.
The above is general information and you should seek advice before making super contributions.
Write off any bad debts before 30 June 2020. 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 debt is written off and claim back the amount of G ST 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.
If you are a property investor 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.
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