There is still time to put in place some tax planning strategies before the end of the 2019 financial year and minimise your business tax bill.
1. Defer income
It is worth considering whether any assessable income can be deferred to the next financial year – you should seek advice on this before acting as careful consideration is required. It may be possible to defer the recognition of accrued income (e.g. work in progress) or unearned income (e.g. fees paid in advance), or delay invoicing if appropriate.
2. Bring forward expenses
If there are any expenses you need to make e.g. repairs, or expenses you can prepay, try to bring them forward so you can claim the tax deduction in this financial year.
You could also look at prepaying 12 months interest on your investment loans or margin loans. Note you’ll need to talk to your lender before doing this to make it effective.
Also consider if any expenses can be accrued, any director bonuses can be paid (consider the super implications below), or if there are any bad debts that should be written off as a tax deduction.
3. Look at your capital gains
Capital gains are generally based on the contract date, not settlement date. Deferral of signing a contract could push the capital gain into the next year, which may put you in a lower tax bracket and/or delay the payment of any tax by 12 months. Please seek advice in this respect though particularly if the gain is a result of restructuring your affairs.
You could also consider selling any investments on which you make a loss before 30 June, to offset the capital gains you have made. Obviously though your investment decisions shouldn’t be based solely on the tax implications.
4. Make super contributions
Employers may pay the June quarterly SG contributions by 30 June to claim the deductions this income year (otherwise due on 28 July).
Individuals can make concessional contributions (i.e. employer contributions and personal contributions you claim as a tax deduction), up to $25,000 in the 2019 financial year. These super contributions could potentially offset any capital gains you make. Also note if your super balance is less than $500,000 you’ll be entitled to carry forward any unused concessional amounts from the 2019 financial year for a maximum of 5 years. So, you could use them in the 2020 or later financial years.
If your spouse has a low income consider making a contribution for him or her which will not be taxed going into the fund and you will receive a tax offset of up to $540 if an after-tax contribution of at least $3,000 is made.
5. Donate to charity
Donations of $2 or more to approved charities and organisations are tax deductible. It’ll make you feel good too!
6. Do a stocktake at 30 June
If the stock value changes by more than $5,000 from the end of the last financial year you must take this into account in your taxable income. A lower stock value this coming 30 June will be an allowable deduction, particularly if you have lost, damaged or obsolete stock.
7. Trust distributions
The trustee of a discretionary trust must decide (and retain in writing) on distributions of trust income by 30 June to ensure that a beneficiary or beneficiaries are “presently entitled” to that income. If the trustee resolution is not made by 30 June, and no beneficiary is presently entitled to trust income at that date, the trustee will be assessed on the trust's taxable income at the highest marginal tax rate.
8. Review your asset register
Take a look at your asset register and identify any assets you no longer have, or which are now obsolete. Writing these off may result in a tax deduction and save you tax.
9. Don’t forget the $30k instant asset write-off
Businesses with under $50m turnover can take advantage of the $30,000 instant asset write-off before 30 June.
Speak to the Woodward & Co. team asap if you need assistance with your tax planning before EOFY.