Do you leave it until after 30 June to start thinking about your tax return? There are many good reasons why it is beneficial to plan for your annual tax return well in advance, including possible significant reductions in the amount of tax payable by your business. Below are some strategies you should think of implementing in order to potentially to minimise your tax liability before 1 July strikes.

• Contribute the maximum to retirement/superannuation accounts: By contributing up to the annual “age-based limits” you can reduce your business’ taxable income and potentially gain at least a 30% deduction. Superannuation funds are an excellent investment. They can grow to a substantial sum overtime and can result in future tax-free income, exemptions from CGT, as well as protection from creditors.
   

• Prepaid expenditure: If you are eligible, that is your business has an average gross revenue of less than $2 million for 07-08, and you have elected to enter the Simplified Tax System (STS), then you have the advantage of pre-paying expenditure on items such as rent, insurance premiums or advertising, for up to 12 months and claiming these payments as an immediate deduction.
   

• Realise capital losses to reduce capital gains tax: To save on capital gains tax (CGT) and free-up money for more suitable investments, you could consider selling poor performing assets that no longer suit your circumstances. By doing this, you can use the capital loss you have incurred to offset a realised capital gain from another asset in the same financial year.
   

• Purchase equipment: If your business revenue is less than $2 million then any assets purchased that cost less than $1000 then you can claim an immediate deduction for the full amount. If you think that you may be making such purchases in the near future it would be wise to do so before 30 June.
   

• Defer Income: If you believe that you will be in the same or lower tax bracket next year, then you should consider deferring some income until the following year. By doing this you can potentially save yourself from being pushed into a higher income tax bracket and getting hit with a bigger tax bill.

 End of Year Tax Checklist

Start fresh and get your financial affairs in order, before the 1 July comes around! Here are some tips that we have gathered together to help you and your business get ready and make the right moves for the end of the financial year.

1.      A physical stock take

2.      Prepare/Print out a list of Accounts Receivable (Debtors) as at 30 June

3.      Prepare/Print out a list of Accounts Payable (Creditors) as at 30 June

4.      Print a Trial Balance at 30 June (if you are using a computerised accounting system)

5.      Print a detailed General Ledger Transaction Report

6.      Prepare and print out a Bank Reconciliation at 30 June

7.      Back up all 2007 files

8.      Run Year End procedures (applicable to MYOB users)

9.      Prepare Employees’ PAYG Payment Summaries

 Other important tax points to be remembered

• Ensure mandatory superannuation contributions are up to date: In order to avoid incurring penalties, the minimum super contribution of 9% for all employees between 18 and 65 years who earn more than $450 per month must be made before 28 July. However, in order to be claimed as a deduction in the current tax year, the payment/s must be made prior to 30 June.
   

• Fringe Benefits Tax: FBT is a tax paid by employers on the value of certain benefits that have been provided to their employees or employees’ associates in relation to their employment. Where the value of the benefits provided to an individual employee exceeds $2,000, employers need to record the total taxable value of certain fringe benefits provided during the FBT year ending 31 March on the employee’s payment summary for the income year ending 30 June. Some “excluded fringe benefits” that are not included in the reporting requirements are: car parking; benefits linked to entertainment facility leasing expenses and entertainment by way of food, drink, accommodation, travel or other expenses in relation to that entertainment.
   

• Motor Vehicle Log Books: If you do not pay Fringe Benefits Tax under the statutory method for your motor vehicles then you must keep a log book for 12 continuous weeks. Log books remain valid for a maximum of 5 years, after which time you will need to prepare another. It is important to regularly keep check of the last time that you prepared a log book.