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.