With the 30 June 2018 fast approaching now is a great time to discuss possible tax savings strategies for your business.
Below are several strategies to think about prior to 30 June 2018:
1. Pay Employee Superannuation
To secure a tax deduction for your June 2018 quarterly superannuation owing, you will need to pay this amount prior to 30 June 2018. This payment must clear your bank account prior to 30 June 2018 for it to be considered a tax deduction in the 2018 tax year. We recommend you make these payments by 20 June 2018 to ensure there is sufficient time for the contributions to clear in the employee’s super fund.
2. Concessional Contributions Cap of $25,000
As a business owner you may wish to contribute extra superannuation into your super fund to obtain a tax deduction. Please note: that the contributions cap includes compulsory super guarantee (SG) payments made by your employer and salary sacrificed amounts. For the 2018 financial year the concessional contributions cap is $25,000 for all age groups. Please ensure you do not exceed this cap as it could be a costly mistake.
3. Defer Income
If possible, delay issuing invoices to your customers until after 30 June 2018. This will push that income into the following financial year.
4. Bring forward expenses
If possible, you could incur expenses for business use prior to 30 June. This way these expenses will be included in the 2018 financial year rather than 2019 financial year, reducing your tax payable in the 2018 financial year. (Examples include: consumables, repairs, and office supplies).
5. Prepayment of expenses (Small Business Entities only)
If possible, you could review your expenses to determine if any of your 2019 expenses (i.e. rent, insurance or subscriptions) could be prepaid. As a Small Business Entity (SBE) you can get a tax deduction in the 2018 financial year for expenses you prepay relating to the 2019 financial year as long as the prepayment was made prior to June 2018 and it is not for a period of more than 12 months. To qualify as a small business entity (SBE) for the 2018 financial year, you need to be operating a business and have aggregated turnover of less than $10,000,000.
6. Small business instant asset write-off of $20,000 (Small Business Entities only)
For SBE’s the instant asset write-off threshold is $20,000 for the 2018 financial year. This instant asset write-off applies to most assets but there are some exclusions so if you are unsure please check with us before you purchase your business assets. If you are an SBE and you purchase an eligible business asset with a value of $20,000 or less prior to 30 June 2018, you can get a deduction for the full amount in the 2018 financial year. To qualify as a small business entity (SBE) for the 2018 financial year, you need to be operating a business and have aggregated turnover of less than $10,000,000.
7. Review of your debtors
You could review all of your debtors to determine if you have any outstanding debtors that are unlikely to pay? If so, you should consider writing these off prior to 30 June 2018 so you are not paying tax on money you are not going to receive.
8. Review of your depreciation schedule (Non-Small Business Entity clients only)
You could review your depreciation schedule for any assets that should be written off (because they are obsolete, no longer used in business or have been stolen) prior to 30 June 2018. This could enable you to get a tax deduction for the closing book value of the asset written off in the 2018 financial year.
9. Motor Vehicle Expenses
To maximise your motor vehicle tax deductions please ensure you have a valid logbook. Having a valid logbook gives us more options to choose from when we are selecting an ATO calculation method for your motor vehicle claim each financial year. For a logbook to be valid it needs to be kept for a period of 12 continuous weeks and it should be no more than 5 years old.
10. Stock take
If you hold stock on hand, you should complete your stock take as close to the 30 June 2018 as possible. Once completed, you should review your stock take to identify any obsolete/worthless items that need to be written off. By writing off these items prior to 30 June 2018 you will receive a tax deduction for the cost of this stock.
11. Reducing the corporate tax rate
From the 2018 financial year a company that qualifies as a Base Rate Entity (BRE) will be taxed at the lower corporate tax rate of 27.5%. For a company to qualify as a BRE, they must meet the following three criteria:
- Have an aggregated turnover of less than $25,000,000 and
- Be carrying on a business, and
- Have no more than 80% base rate entity passive income (This last one is currently a proposed amendment to the law but if it is passed will take affect from the 2018 financial year).
12. Trust Distribution Minutes
Have you completed your Trust Distribution Minutes? Your Trust Distribution Minute records the Trustee’s intention to allocate the Income of the Trust to the beneficiaries in a specific manner. The 2018 Trust Distribution Minute needs to be completed and signed by 30 June 2018.
If you would like to discuss any of these tax saving strategies with us please feel free to get in touch with our experienced team at Quill Group. It would be our pleasure to assist you with any of your business accounting needs.
