End of Financial Year Business Tax Return Basics
With the recent announcement and discussion of the new federal budget, it is time for business owners to get ready for the 2015 tax return and begin tax planning for the future. The following are essential tasks for you undertake at the end of financial year.
EOFY To-Do List
• Conduct a detailed end of year stock take and work in progress listing as at 30 June. Review and write-off any obsolete or worthless items;
• Conduct annual reconciliation of payroll tax, GST, PAYG withheld tax;
• Reconcile annual wage, contractor payments and superannuation;
• Consider your cash flow and whether to pay off the June Quarter superannuation guarantee prior to 30 June;
• Review aged debtors to consider whether any bad debts should be written off and prepare relevant minutes of the director’s meeting;
• Collate documents of fixed asset purchases or asset improvements expenditure to calculate the depreciation amount;
• If you are operating in the construction industry prepare worksheets for annual taxable payments report;
• Ensure motor vehicle logbook is still within the 5 year period;
• Consider the company’s dividend and distribution of partnership and trust;
• Defer issuing further invoices if the product/service or payment would not be provided after 30 June;
Understanding the Requirements of Eligible Deductions
• Funds placed into superannuation can only be deducted when it is actually paid to a complying superfund;
• Small business owners who are over the age of 49 could contribute concessional superannuation amount of up to $35,000. Any amount over the cap will be included in your personal assessable income and taxed at your marginal tax rate;
• An immediate deduction is applicable to small businesses that purchase any eligible assets costing less $20,000 which were acquired after 7.30pm on 12 May 2015. This deduction is also available for any pool assets with a balance below $20,000;
• Prepayments of rent, insurance and subscription expenses before 30 June are fully deductible;
Some Issues to be aware of:
• Ensure shareholders loan account is not a debit balance at 30 June, to prevent triggering the application of Division 7A;
• 15% extra tax will be imposed via Division 293 if your personal adjusted taxable income is over $300,000
• Ensure at least 85% of the estimated income tax was reported and paid within the four quarterly BASs under the PAYG instalment. If you fail to do so, the ATO might impose a penalty and charge interest for the shortfall payment;
Get ready and plan ahead
Tax planning strategy is an art to postpone or minimise taxes by taking advantage of certain tax-law provisions, which enable you to effectively utilise working capital for general business operation and capture any potential investment opportunities.
Putting hard work and tax planning ahead is an essential key to improve your cash flow management for the new financial year.
If you require any further information or assistance in regards to lodging a business tax return or tax planning, contact our team of accountants at The Quinn Group on (02) 9223 9166.