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 2016. 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.
Tax Tips Broken Down
Small business entities (turnover of less than $2 million)
1. Purchase assets costing less than $20,000 (excluding GST): The small business instant write-off threshold is $20,000 for the 2015-2016 income year. 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. Get ready for SuperStream: Initially small employers (19 or less employees) and SMSFs receiving contributions from these employers were required to be SuperStream compliant by 30 June 2016. However, the ATO will provide compliance flexibility to small businesses that are not yet SuperStream ready until 28 October 2016. This standard involves the sending and receiving of contributions electronically in a prescribed format, with linked data and payments.
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 2016 financial year. You need a formal minutes of directors meeting. The Quinn Group can provide a template.
8. Pay your super contributions prior to June 30: Whilst your employee superannuation contributions are not due until 28 July 2016 if you wish to claim a deduction for this financial year you must ensure the superannuation fund receives payment by 30 June 2016. Payment after this date means you won’t be able to claim them until EOFY 2017.
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 our tax accountants at the Quinn Group before June 30 who can advise you of the advantages and disadvantages of each structure.
10. June 2016 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 2016/2017 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 2016 financial year.
15. Trust Distribution: The trustee of a trust is responsible for managing the trust’s tax affairs, including lodging trust tax returns and paying tax liabilities arising from assessments made to them. All trustees who make beneficiaries entitled to trust income by way of a resolution must do so by the end of an income year (30 June). This resolution will determine who is to be assessed on the trust’s taxable income.
Investments and Capital Gains Tax
16. 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.
17. 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.
18. Transfer investment of ownership: Put income earning investments like term deposits and shares into a family member/ spouses name with a low income.
19. Appointment of tax agent: If you don’t already have a tax agent, be sure to appoint one before 31 October 2016. As it may provide you with an extension for lodgement of your tax return as far as May 2017.
20. 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.
21. Gifts and Donations: Is there a charity particularly close to your heart? Make your donation of $2 or more to a registered deductible gift recipient before June 30, it’s tax deductible!
22. 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.
23. 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.
24. 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 and the offset for superannuation contributions made on behalf of a low income spouse.
25. Prepay your private health insurance premiums: You may wish to consult us on whether you should prepay your private health insurance premiums prior to June 30 2016 in order to maximise your entitlement to the private health insurance offset.
If you would like tax advice or need to lodge your tax return, contact The Quinn Group on 02 9223 9166 to arrange an appointment, submit an online enquiry or download one of our FREE 2015/2016 Tax Record Kits.