With the end of the 2018 financial year approaching us fast, I’m going to provide some simple year-end tax planning tips. Tax planning should be done on a regular basis throughout the year. However, these tips are especially relevant to consider just before the end of the financial year.
Outlined below are several suggestions that may assist taxpayers to legitimately minimise or defer their taxation exposure.
Take Advantage of Depreciation Allowances
If you are a small business you are eligible for the $20,000 Immediate Asset Write Off. If you are considering an asset investment and it is made prior to 30 June 2018, you will receive an immediate tax deduction for assets costing up to $20,000 in this tax year.
There are no limits on the amount of times a business can claim the $20,000 deduction and restrictions on the type of asset bought.
For your business this could mean a tax deduction of up to $5,500 for a $20,000 asset.
These measures will continue to be available until 30 June 2018 so act quick.
Timing of Income & Expenses
At this time of year, where possible and appropriate you should defer revenue and bring forward expenditure
Revenue deferred to post 1 July 2018 will not incur tax until the 2019 financial year and expenses brought forward before 30 June 2018 will be deducted in the 2018 year, creating an overall lower profit position for tax purposes.
Bad Debt Review
Review your debtors – particular those that are more than 90 days old. Are these customers likely to pay you? If not, you should write the debt off and stop paying tax and GST on amounts you won’t receive.
Make Superannuation Contributions
As business owners you can make contributions to superannuation and claim a tax deduction for any payments made before 30 June 2018. Please note that your superannuation fund will pay tax of 15% for contributions received. Only contributions that are received by a superannuation fund by 30 June 2018 on behalf of employees including working directors, are tax deductible to your business in the 2018 year.
Note however that the ATO have ruled that internet transfers of contributions are not considered paid until they reach the receiving fund’s bank account, not when the employer processes the internet transfer.
We suggest that any contributions you plan to make and claim a tax deduction for are made well before 30 June 2018.
These tax planning ideas are of general nature only and have been provided to assist small business owners with some general ideas in relation to their tax affairs. Spending money solely for tax deductions is never a good idea. Before investing or purchasing items make sure your business or you will receive a benefit from the expenditure other than tax.
Author: Adam Galea