Tax Tips you need to be aware of
The end of the financial year is nearly upon us meaning it’s tax time once again. In order to help you prepare for the new financial year, we have put together 25 tax tips to consider before June 30 2013. Our tax tips have something for everyone; so if you’re looking for small business tax tips, investment tax tips or tax effective strategies as an individual keep reading to find out what you should consider before the tax year ends.
Small business entities (turnover of less than $2 million)
1. Purchase assets costing less than $6,500: The small business instant write-off threshold has increased from $1,000 to $6,500 for the 2012-2013 income year onwards. This means you can claim an immediate deduction for these assets providing they are installed and ready for use.
2. Comply with Division 7A: The ATO is vigilant on businesses that use funds or assets of a company for their personal purposes. Any personal expenses that are paid by a private company in respect of a shareholder may be treated as a deemed dividend to the shareholder. Ensure that such payment or loan is repaid by June 30 to avoid a deemed dividend arising.
3. Acquire a business vehicle: Eligible SBE’s can claim up to $5,000 as an immediate deduction for motor vehicles bought from the 2012/2013 year. The remainder of the motor vehicle is pooled in the general business pool.
4. Get rid of obsolete equipment: check your asset register and scrap any obsolete machinery or plant equipment prior to June 30 and take advantage of an immediate write-off deduction.
5. Conduct a stocktake: take an inventory of your stock to identify slow moving stock and write them off before June 30
6. Claiming R&D tax offsets: If you are a Research & Development (R&D) entity, engaging in eligible activities and have notional R&D deductions of at least $20,000 you may be able to claim the R&D tax offset. You must first register your R&D activities with AusIndustry. The two core components are:
- a 45% refundable tax offset to eligible entities with an aggregated turnover of less than $20 million per annum
- A non-refundable 40% tax offset to all other eligible entities
If you believe your business may qualify for the R&D offset, speak to a registered tax agent who will be able to assist you in the process.
7. Write off your bad debts: If you are carrying bad debts, now is the best time to review them. If you decide they are irrecoverable, write off any bad debts before June 30 so you can claim them as a deduction in the 2013 financial year.
8. Pay your super contributions prior to June 30: Whilst your employee superannuation contributions are not due until 28 July 2013, pay them before June 30 so you can claim a deduction this financial year. Payment after this date means you won’t be able to claim them until EOFY 2014.
9. Reconsider your business structure: Tax time is a good time to re-evaluate your current business structure. If you think you’re paying too much tax or are wanting to take on another partner, speak to a professional before June 30 who can advise you of the advantages and disadvantages of each structure.
10. June 2013 PAYG Instalment: Vary your June quarter PAYG instalment if you estimate the taxable income of your entity will be substantially lower than last year.
11. Create a 2013/2014 cash flow forecast: Having a cash flow forecast will help you determine likely trends and outcomes. A cash flow forecast can also assist you when the unexpected happens.
12. Update your overall business plan: Review your current business plan and make changes as required. Capture your objectives in the business plan so you have a baseline performance for the year ahead.
13. Review your trust deeds: Make sure you comply with the requirements of your trust deed in declaring distributions to ensure the distributions are valid. Also, check your trust is still working as you expect it to including making sure the person or entity that has the power to replace the trustee is still the right person.
14. Consider distributing up to $416 to minors (under the age of 18): You can distribute $416 tax free money to your child who is under 18 years of age for the 2013 financial year.
Investments and Capital Gains Tax
15. Get your rental deductions right: It’s critical that rental property owners have their books up to date and in order before June 30. Make sure you are only claiming deductions for expenses incurred for the period when the property is rented or available for rent and in the year of the tax return. Also, ensure that you have diary records to substantiate your inspections of your rental property and keep all documentation of your travel expenses.
16. Minimise the CGT you pay on investments: When calculating the value of assets for CGT purposes, be sure all costs of acquiring the asset – purchase price, capital improvements, stamp duty, legal costs, advertising expenses and commission fees are taken into account to ensure the assessment is as low as possible.
17. Transfer investment of ownership: Put income earning investments like term deposits and shares into a family member/ spouses name with a low income.
18. Appointment of tax agent: If you don’t already have a tax agent, be sure to appoint one before 31 October 2013.
19. Reduce your taxable salary by packaging FBT exempt items: Consider salary packaging a laptop, iPad or phone if you are using them predominately for work-related purposes.
20. Gifts and Donations: Is there a charity particularly close to your heart? Make your donation of $2 or more before June 30, it’s tax deductible!
21. Deduct home office expenses: If part of your home is set aside primarily for the purpose of working from home, costs such as office equipment, heating and lighting may be deductible. To claim the deduction you must have kept a diary for at least four weeks of the hours you worked at home.
22. Reconsider income protection insurance arrangements: Review your current level of protection and determine whether an increase may be appropriate in regard to a pay increase or additional business profits. This is deductible.
23. Optimise your tax offsets: It pays to know what offsets you are entitled to, as they directly reduce your tax payable and can add up to a sizable amount. Depending on your circumstances, you may be eligible to the low- income tax offset, mature age worker offset and the offset for superannuation contributions made on behalf of a low income spouse.
24. Prepay your private health insurance premiums: You may wish to consult a registered tax agent on whether you should prepay your private health insurance premiums prior to June 30 2013 in order to maximise your entitlement to the private health insurance offset.
25. Bring forward eligible medical expenses: The medical expenses offset is now means tested. For taxpayers with an adjusted taxable income exceeding $84,000 for singles and $168,000 for couples, a 10% tax offset is available for net medical expenses exceeding $5,000 in the 2012/2013 year. Where practicable, such individuals may consider bringing forward eligible medical expenses prior to June 30.
If you would like a PDF copy of our 25 tax tips click here.
As both an accounting and legal firm The Quinn Group can offer accounting and legal services in one location. If you need help with your tax affairs or are after specific tax planning advice, call us on 1300 (QUINNS) or + 61 2 9223 9166 to arrange an appointment or submit an online enquiry form.