07 Jun Business Planning
Get your health & hygiene tax list together
There are lots of little things that need to be attended to that can add up to tens of thousands of dollars in tax savings. Writing off bad debts, maximising stock valuation outcomes, declaration of bonuses and director fees, prepayments, income deferrals, trustee resolutions to appoint income, maximising depreciation charges, superannuation payments.
1. Do you have a trust?
Trustees need to decide on distributions of trust income by 30 June (at the latest) to ensure that beneficiaries are presently entitled to trust income for tax purposes. Trustees used to have until 31 August to make a decision but this administrative concession has been removed. If the ATO is not satisfied that the resolutions have been made in time then the risk is that the trustee or default beneficiary will be taxed on all of the trust income.
2. Do you owe money to your company?
If you operate through a company structure and the company has advanced you money during the year or paid expenses on your behalf, then work out whether you are going to repay the loans or put in place a complying loan arrangement. If you already have loan agreements in place from prior years make sure that you make the minimum repayment (including interest) before June 30.
3. Consider whether to buy cars or small assets
From 1 July 2012, Small Business Entities (operational businesses with an aggregated turnover below $2 million) have access to a much more generous system for claiming depreciation deductions on the purchase of plant and equipment. From 1/7/2012 you can claim an immediate deduction for any depreciating assets that cost less than $6,500 (after GST credits have been taken off the original cost), and an immediate deduction for the first $5,000 for any motor vehicle used for business purposes (new and second hand vehicles).
4. Defer your income
If possible, defer your income until the new financial year. In particular this can work for service based businesses or where you are billing your clients on a progress payment basis. Make sure that you can manage any cash flow effects that come with this one.
5. Manage your capital gains and losses
Remember that capital gains trigger on the date of the contract not the date of payment. Also, capital losses can only be written off against capital gains. So, if you are selling assets that will trigger a capital gain try and delay the contract until 1 July unless you have some capital losses that you are able to offset against.
6. Make the marginal tax rates work for you
If you operate through a trust structure or have discretion around who to pay director’s fees or bonuses to, look at the individual marginal tax rates or the use of entity rates where income could be appointed to a wholly owned company. With trusts, there might be an opportunity to appoint income to children or family members where no tax would arise.
7. Key person or income protection insurance
If you’ve always meant to take out these insurance policies, now might be the time. Pay the annual premium before June 30 and take the deduction into this year.
8. Dividends
If you operate through a company and are going to pay dividends this financial year, make sure that the appropriate resolutions are made and documented. Check whether you need to pay the dividend before June 30. If you wait until July 1 you will defer any additional tax for another year.
9. Increase in Superannuation Guarantee rate
The rate of contributions under superannuation guarantee increases 0.25% to 9.25% with effect from 1 July 2013. The higher contribution rate must be paid on superannuable payments made to employees on or after 1 July 2013, even if the pay relates to service before July.
You should confirm your payroll processes will comply with the new contribution rate. The rate increase can also create practical difficulties you may need to consider and act on. For example, it is likely the majority of employees will receive less take home pay from 1 July. There may also be impacts on existing salary packaging arrangements, such as employees who are salary sacrificing extra contributions to super.
10. Super Guarantee to apply to employees age 70 and over
Also from 1 July 2013 the upper age cut-off under superannuation guarantee is removed, i.e. super guarantee applies on eligible earnings regardless of the age of the employee/director. You may need to commence contributing for employees over age 70. Similarly, there may be an obligation to contribute on director fees paid to directors over 70. The contribution obligation will be 9.25% of the earnings paid, or 9.25% of the maximum contribution base for the quarter, whichever is the lower amount.
12. Where are the bigger tax planning opportunities
Beyond these health and hygiene opportunities there may be larger tax planning opportunities that should be considered. This could include being eligible to claim R&D tax concessions, taking advantage of the loss carry back rules to get a refund of company tax paid in the last year, and export market development grant eligibility. All of these opportunities are time sensitive and time limited. The things you do between now and June 30 could make a significant difference in the benefit obtained.
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