The clock is ticking and the End of Financial Year is fast approaches. Before the calendar flips its way to June 30, it is essential to have your business tax affairs in order and be certain to remain on top of your finances to avoid accounting fatigue.
Most especially, this is the right moment to guarantee you take advantage of every possible opportunity, so you don’t miss out claiming what you’re entitled to. This means SAVING on your tax bills. So to get you ready for June 30, here are some great tips.
1. Make use of the Instant $20,000 tax write-offs
ATO extended the Asset Deduction Scheme until June 30, 2019, that entitles all Small Business owners whose aggregated turnover is less than $10 million to have an instant $20,000 tax write-offs.
In this scheme, they can claim multiple asset deductions as long as each purchase is $20,000 or under, making sure that it is made and installed before June 30 and provided all conditions are met.
So, if you need to purchase new assets for your business, now is the right time to do so.
The good thing about this incentive is it didn't limit for assets only; hence it also covers business assessable income.
Here's a list to determine whether the assets you are going to purchase is included in the write-off or not.
Included assets
- Assets that cost less than $20,000
- Assets that are directly related to your business' income-producing activity, e.g. computers, phones, vehicles, tools, machinery, equipment, websites, etc.,
2. Pay Any Unpaid Super
If you are behind on paying your super obligations make this your first priority. If your super is not paid on time it will never be deductible. Not now - not ever. Get your super in order before you pay anything else or you will miss out on a valid deduction and end up paying more tax - and no one wants that.
3. Prepay expenses
One of the easiest ways for a small business owner to claim tax deduction is by prepaying work-related expenses for the coming year early. If you have that cash why not get ahead and get the deduction.
- Rent
- Insurance policies
- Salaries
- Taxes
- Legal expenses
- Interest expenses
- Equipment paid for before use
By bringing forward your tax-deductible expenses and deferring revenue, you can reduce your business’ taxable income for the financial year. Just make sure you’ll utilize them before June 30.
Upon prepaying your expenses prior the EOFY, you will receive the tax savings for the expenses you paid for at the lower 27.50% rate.
Immediate deduction can be claimed under the 12-month rule for prepaid expenditure if the payment is incurred for a period not exceeding 12 months and ends in the next income year.
If you are planning to settle your prepaying expenses, do it now, but don't forget to consult your trusted financial advisor beforehand.
4. Consider Making Additional Super contribution
For the 2017-2018 financial year, the maximum concessional superannuation contribution limit is $25,000 for all individuals regardless of age.
This means that your business can claim a tax deduction for all concessional contributions made for employees. You can only get a deduction when the contribution is paid and been received by the superannuation fund before the year-end and It is wise to settle it a week before June 30.
5. Maximize your Spouse Superannuation Contribution
Another possible tax concession you can consider is making an after-tax contribution to your spouse’s super account – also known as eligible spouse contribution.
If your spouse is working in your business, you’ll receive the maximum tax offset of $540, provided a contribution of at least $3,000 is made.
This strategy will enable you to declare for additional tax offset legally. Under the current 2017-2018 tax rules, you’re eligible to make this contribution if your spouse’s total assessable income, employer super contributions, and fringe benefits are $37,000 per annum or less.
If the income is ranging from above $37,000 up to $40,000, you can still receive an offset but at a lower rate. You can contribute more than $3,000, but you won’t receive the spouse contribution tax offset on anything above $3,000.
6. Conduct a Stocktake
It is very practical to do a stocktake at the end of the financial year for tax season with a view to writing off any obsolete or damaged stock. If stock that is bought but is NOT sold is NOT tax deductible.
And your goal as an owner is to make the most out of the EOFY. So why keep that stock that hinders you maximize your deduction?
Take action, manage your trading stock by selling it at a cheaper price so that you can lower the value of the stock on hand and reduce your tax liability. It’s also a good general business practice to get into to ensure you don’t have too much money tied up in inventory.
7. Write-off Bad debts
It is imperative to review and write-off any bad debts before June 30 to ensure that you can get a deduction. Nobody wants to pay their tax on an income that they didn’t or not going to receive.
Before declaring those debts, assure that It was included in your assessable income for the income year or for an earlier income year to qualify for the deduction.
Addition to that, if you report your income on an accrual basis, you are credible to claim a refund of the GST paid to the ATO on sales.
Now that you have these guidelines, start reviewing your finances and consult with the team at Bookkeeping Central or your tax accountant to ensure that you can make the most all these deductions.