With 30th June fast approaching, here is a list of common tax planning strategies that we have been discussing with clients:-
- Prepaid revenue can be deferred to the extent that it relates to next financial year and where a customer has the contractual right to cancel the contract at any time.
- Buying items such as stationery, printer cartridges, stamps, etc by Sunday 30th June. Those of you who entered the Simplified Tax System (STS) by 30th June 2005 (who are therefore automatically assessed on a cash basis) may wish to pay any bills not due until July like your phone bill, rent, printing and stationery, etc. Paying your accounting fees is also recommended!
- STS taxpayers are now known as Small Business Taxpayers (SBTs). SBTs now include taxpayers with an annual turnover under $10,000,000. As we have previously highlighted, SBTs can claim a full deduction for any assets acquired costing less than $30,000 excluding GST – but note lower limits of $20,000 for assets bought before 29th Jan and $25,000 before 2nd April.
- The $30,000 limit will apply to assets bought ad installed rady for use by 30th June 2020.
- The $30,000 asset write off has also been granted to businesses with annual turnover up to $50,000,000.
- SBT taxpayers can claim half a year’s depreciation on acquired assets that cost more $30,000 – even if the asset is purchased on the last day of the year. If a business owner buys a business asset costing $40,000 today, then they get to claim depreciation of $6,000 in this financial year followed by $10,200 in 2019/20. Buy that same asset in July 2019 and the claim by 30th June 2020 is only $6,000.
- For more on the instant asset write-off, refer to recent blogs titled Parts 1, 2 and 3.
- SBT taxpayers can also claim a full deduction for payments such as insurances, rent and the like which cost more than $1,000 even though the service period runs past 30th June and into the next financial year.
- For those of you who receive this e-mail that are employees or rental property owners, you can claim a complete write off for assets costing less than $300.
- If a property is jointly owned, then you can claim the full cost of assets costing less than $600 (meaning you claim less than the $300 limit each).
- Investors can claim prepayments in full. An investor with a property or share loan can claim a deduction for 12 months prepaid interest. Please note that the ATO requires that for the prepayment to be claimed, one must benefit through a lower interest rate (for which you need to keep proof).
- For those who have already generated a large capital gain, consideration should be given to selling other investments that have an unrealised capital loss. Those with no or minimal employer SGC support should consider making a deductible contribution into superannuation to offset the tax on the capital gain (but speak to a financial planner first).
- If you are about to sell an asset which will generate a capital gain, consideration should be given to selling it after 30th June. This will defer the payment of any capital gains tax liability until after 30th June 2019.
- Companies can accrue a director’s fee which is not payable until the following financial year. Why? – the company gets a deduction in this financial year but the director is not assessed on the income until the following financial year in which it is received. The trick is to document it correctly.
- If you have stock, count it (a separate e-mail will be sent to business clients with stock). As stock can legally be valued differently from item to item and from year to year, it can result in some advantageous outcomes.
- Donations are deductible. It must be a genuine donation so you can’t receive anything in return. Raffle tickets can’t be claimed.
- Our tax planning checklist also considers other items such as writing off bad debts, making Division 7A loan repayments, distributing to a new beneficiary, varing PAYG Instalments, super rule changes that you may benefit from (after receiving financial planning advice) valuing stock by using costs or net realisable selling method. How these and other opportunities are employed depends on your circumstances.
All of the above tax planning tips are explained to our clients in any easy to read Tax Planning Report.
We welcome any query about these tax planning tips but also in respect of your preparation for Singe Touch Payroll (for which our clients have been receiving weekly preparatory updates ahead of the start date of 1st July 2019).
At MRS, we will spend today planning for your success.