The lead up to the EOFY marks the most crucial time for business owners to put time and effort into tax planning initiatives. With just a couple of weeks before we enter the new financial year, here's a few things to consider which may reduce your tax payable.
With June 30 just around the corner, the next couple of weeks are a busy time for business owners who are on a mission to end the current financial year on a high. The lead up to EOFY marks an important time of the year for tax planning, since actions taken before June 30 can have a significant impact on your end of year tax position. If left until the new financial year, strategies are typically meaningless, and the benefits aren’t reaped until the following EOFY. Ideally, every business should have a strategy around their tax position to make sure you keep the most amount of money in your business and finish the financial year strong.
To help you on your way to a better EOFY, we’ve put together our top tips on what you should consider before June 30.
Deductions for expenses
With the increase in small business rules from $2m to $10m turnover, a lot of businesses can benefit from the “cash base” accounting system to save paying tax on your debtors. With this, some of your expenses may need to be paid prior to 30 June in order to lock in a tax deduction for this year, so make sure you get these expenses out ASAP.
Small business instant asset write off < $20,000
As a small business, the ATO
has allowed another year of write offs for assets costing less than $20,000. This means each individual asset under $20,000 is an immediate tax deduction.
Superannuation – staff and personal
Superannuation is deductible when it is paid, not accrued so consider pre-paying your staffs’ super. That means for staff superannuation for the June month/quarter, if paid and received by the superfund before June 30 you will be eligible for a tax deduction in this year. Personally, you are eligible for $25,000 per year per member (subject to age and super balance restrictions). Again, this needs to be received by the fund prior to 30 June 2018.
Business and personal structures and the use of trusts
There are some significant benefits for small business owners through the use of effective tax structuring which can keep more money in your pocket year to year. The use of companies, trusts and holding companies can all form important parts of effective tax planning. Ensure you’re set up with the right structure that is most effective for your situation.
It goes without saying that all investments are different. Likewise, investment structure advice also varies. Unfortunately, the best investment bought through the wrong structure is likely to have little benefit in return after tax obligations. It’s important to get your structure in order before making your next investment purchase to reduce the risk of additional capital gains and stamp duty.
- Trusts are often great investment tools, but they can bring with them limitations with locking up negative gearing benefits and other deductions that you may benefit from in your own name
- Companies provide great working capital tax rates, but don’t offer the capital gains discounts
- Superfunds tick a lot of the tax boxes, but have limitations on both the use of the asset as well as access to the funds
Make the effort to set aside some time over the next week or two to action some of these considerations. It could help to reduce your tax bill! If it’s all a bit mind-boggling, the team at Carbon Accounting are happy to help.
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