Year End - Tax Smart
MUST do's before the end of the financial year!
We understand. Having your accountant tell you how to prepare for the end of the financial year is a bit like your dentist telling you to floss every day or that recent advertising campaign extolling the virtues of eating an apple a day. We know we should but...So, we're making it easy for you with these top tips to save your business cash and make sure you don't pay more tax than you need to.
Tax Smart
- Got bad debts? Very few businesses survived the GFC without having a few bad debts. You know those customers who moved through the cycle from being friendly and upbeat "yes, we'll pay that by the end of the week" to being downright cranky "we'd said we'd pay you!" to just being unavailable "...he's not here right now." You know it's been tough to collect your payments when your Office Manager gives you a high five when a payment comes in. When did getting paid move from a normal part of business to an achievement? If you have tried everything to recover the debt and you are sure there is no hope of being paid, you can write-off the debt this financial year and claim it as a deduction.
- Making the most of plant & equipment deductions If you operate a small business with a turnover under $2 million, you might be able to claim an immediate deduction for the cost of certain assets under $1,000. For everyone else, take a look at your asset register. If you have redundant or damaged plant & equipment that has no value and you are unlikely to use in the new financial year, you might be able to claim the remaining tax written down value
- Paying bonuses to your team or directors'
fees?If you intend to pay Directors' fees or bonuses to your team, you can claim the deduction in this financial year if you let the people affected know, before 30 June, that the fee or bonus will be paid. Just make sure that you have proof that you advised them pre 30 June and you have a minute noting that the fee or bonus will be paid. The payment does not have to be made this financial year to claim the deduction. If the payment is not made
until July, the person will not have to declare the income until the next financial year. - Making the most of related entities If you're charging management fees between related entities, make sure the fees are raised pre 30 June (and minuted) to claim the deduction this year. You also need to make sure that the charges are commercially reasonable as this is an area that the Tax Office is looking very closely at! We're sure you're brilliant but unless your last name is Trump charging $500,000 for your input into the other business just might not be reasonable.
- Bringing forward deductions for things you
are going to buy anyway You can bring forward deductions and increase your refund (or reduce your tax debt) simply by taking a look at what you need to spend money on in the New Year and acting on it now. For example, you might need repairs to be done, want to replenish your stock, or need to make trade gifts or corporate donations. It's not always necessary to pay for the items this financial year, as long as you have the invoices and purchase orders for this financial year to support the deduction. - Make a tax-deductible charitable gift
If you itemize deductions on your income tax, you might want to review your charitable giving this year and consider making an end-of-year gift to a nonprofit organization to do well and lower your taxes at the same time.
