So Tax time is upon us again (where has the year gone?!) If you have been following our blog posts you will have used all our Tax tips throughout the year to maximise your returns and be smiling all the way to the tax man.
As it’s fresh in your mind we thought it would be a good time to refresh you on how to make the most of your tax return for the next financial year and share some tax tips – it’s never to early to start. If you get all your ducks in a row starting from now by June 30 2018 you’ll be cool calm and collected and maximising your returns with very little effort.
Tax planning should be done on a regular basis throughout the year. Imagine what you could do with tax saved? Here’s some tax tips my accountant shared with me this year and I want to share them with you too.
• Reduce your home loan
• Top up your super
• Have a holiday
• Deposit for an Investment Property
• Upgrade your Car
Here’s a guide to the strategies you can use to minimise your business tax.
IS YOUR BUSINESS A “SMALL BUSINESS ENTITY”?
Small businesses can access a range of tax concessions from the ATO. To qualify as a “Small Business Entity”, the business must have an aggregated turnover (your annual turnover plus the annual turnover of any business connected / affiliated with you) of less than $2 million and be operating a business for all or part of the 2017 year.
In the 2016/17 Budget, the Government announced an increase to the Small Business Entity turnover threshold from $2 million to $10 million from 1 July 2016. This legislation is still waiting to be passed by Parliament.
REDUCTION IN COMPANY TAX RATES FOR SMALL BUSINESSES
The company tax rate for businesses with less than $2 million turnover (and possibly less than $10 million turnover) is expected to reduce from 28.5% to 27.5% for the year ended 30 June 2017.
If you use a Trust structure, one strategy is to allocate profits to a “Bucket Company” and cap your tax at 27.5% for the 2017 year. Note that this company must have business operations to qualify for the reduced company tax rate.
INSTANT DEDUCTION FOR ASSETS LESS THAN $20,000
If your business is a Small Business Entity, the following tax concessions apply:
• Depreciating assets valued at less than $20,000 will be immediately deductible
• Depreciating assets valued at more than $20,000 will be depreciated in one pool at a rate of 15% in the first year and 30% in future years
• If your pool balance at the end of the year is less than $20,000 before applying any other depreciation deduction, the entire pool balance can be written off.
If your business is not a Small Business Entity, you will need to Depreciate all assets purchased over $300. Any assets purchased for $300 or under can be immediately deducted.
MAXIMISE DEDUCTIBLE SUPER CONTRIBUTIONS
The concessional superannuation cap for 2017 is $30,000 per year for persons under 49 as at 30/6/16, and $35,000 for persons aged 49 to 74. Do not go over this limit or you will pay more tax! Note that employer super guarantee contributions are included in these caps. Where a concessional contribution is made that exceeds these limits, the excess is included in your assessable income and taxed at your marginal rate, plus an excess concessional contributions
TOOLS OF TRADE / FBT EXEMPT ITEMS
The purchase of Tools of Trade and other FBT exempt items for business owners and employees can be an effective way to buy equipment with a tax benefit.
Items that can be packaged include Handheld/Portable Tools of Trade, Computer Software, Notebook Computers, Personal Electronic Organisers, Digital
Cameras, Briefcases, Protective Clothing, and Mobile Phones.
If structured correctly, the Employer will be entitled to a tax deduction for the reimbursement payment to the employee (for the equipment cost), claim any GST input credit, and the employee’s salary package will only be reduced by the GST-exclusive cost of the items purchased.
PAY EMPLOYEE SUPERANNUATION NOW
To claim a tax deduction in the 2018 financial year, you need to ensure that your employee superannuation payments are received by the super fund or the Small Business Superannuation Clearing House (SBSCH) by 30 June 2018.
You should avoid making last minute superannuation payments as processing delays may cause them to be received after year end.
If possible, defer issuing further invoices and receiving cash/debtor payments until after 30 June. This strategy will be particularly effective for companies in the $2 million category whose tax rate is expected to reduce from 28.5% to 27.5% for the 2018 year.
BRING FORWARD EXPENSES
Purchase consumable items BEFORE 30 June. These include marketing materials, consumables, stationery, printing, office and computer supplies. Spend the money now and get the deduction this year.
REPAIRS & MAINTENANCE
Make payments for repairs and maintenance (business, rental property, employment) BEFORE 30 June.
DEFER INVESTMENT INCOME & CAPITAL GAINS
If possible, arrange for the receipt of Investment Income (e.g. interest on Term Deposits) and the Contract Date for the sale of Capital Gains assets, to
occur AFTER 30 June.
The Contract Date is generally the key date for working out when a sale occurred, not the Settlement Date!
MOTOR VEHICLE LOG BOOK
Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12-week period must be on or
before 30 June 2018. You should make a record of your odometer reading as at 30 June 2018, and keep all receipts/invoices for motor vehicle expenses.
An alternative (with no log book needed) is to simply claim up to 5,000 business kilometres (based on a reasonable estimate) using the cents per km method.
INVESTMENT PROPERTY DEPRECIATION
If you own a rental property and haven’t already done so, arrange for the preparation of a Property Depreciation Report to allow you to claim the maximum amount of depreciation and building write off deductions on your rental property.
PRIVATE COMPANY (“DIV 7A”) LOANS
Business owners who have borrowed funds from their company in previous years must ensure that the appropriate principal and interest repayments are
made by 30 June. Current year loans must be either paid back in full or have a loan agreement entered in before the due date of lodgement for the company return or risk having it counted as an unfranked dividend in the return of the individual.
In giving you these tips (kindly passed on from Team Accountants) we are aware that the government can make changes (and lets face it, they probably will) but if you keep to the basics and follow these tips as a guideline then come June 2018 you will be in a much better position to collate your information and maximise your returns.
For any further advice or tax tips and ticks contact Chris today at firstname.lastname@example.org and he will put you onto one of our tax gurus at Team Accountants.