2017 / 2018 Tax Planning Checklist for Business

Now is the time to review your tax position at the end of the income year and evaluate any year-end strategies that may be available to legitimately reduce your tax.

Traditionally, year-end tax planning for small business entities (SBE’s) is based around two simple concepts – i.e. deferring income and accelerating business deductions. SBE taxpayers are those who have an annual turnover of less than $10million including that of related entities.

Deferring income

Revenue is generally recognised when an invoice is raised. By deferring invoicing until July, the income will not be taxable until the following year. Likewise with the interest on Term Deposits, by making the maturity date in July then the interest becomes taxable the next year.

Accrued expenditure

SBE taxpayers on an accruals basis are entitled to a deduction for expenses incurred as at 30 June, 2018, even though not yet paid. Therefore bringing forward expenses by 30th June can increase deductions against profit.

Accelerating expenditure

All SBE taxpayers can choose to write-off depreciable assets costing less than $20,000 in the year of purchase*. Also, assets costing $20,000 or more are allocated to an SBE general pool and depreciated at 15% (which is half the full rate of 30%) in their first year. Therefore, where appropriate, SBE business taxpayers should consider purchasing/installing these items by 30 June, 2018.

It should be noted that SBE taxpayers choosing to use the SBE depreciation rules are effectively ‘locked in’ to using those rules for all of their depreciable assets.

(*) The small instant asset write-off threshold has been temporarily increased to ‘less than $20,000’, for assets acquired and installed ready for use between 7.30pm (AEST) 12 May 2015 and 30 June, 2019.

Superannuation

The annual cap on concessional contributions has been reduced to $25,000 from 1 July 2017 for all individuals regardless of their age.

However, the 10% test to determine an individual’s eligibility for deductions for personal superannuation contributions has been removed from 1st July 2017. This effectively means that employees can contribute up to the difference between the $25,000 cap less what your employer has contributed and gain a tax deduction.

Prepayment strategies

SBE taxpayers making prepayments before 1 July, 2018 can choose to claim a full deduction in the year of payment where they cover a period of no more than 12 months (ending before 1 July, 2019)

The kinds of expenses that may be prepaid include:

– Rent on business premises or equipment.

– Lease payments on business items such as cars and office equipment.

– Interest – check with you financier to determine if it is possible to prepay up to 12 months interest in advance.

– Business trips.

– Training courses that run on or after 1 July, 2018

– Business subscriptions.

– Cleaning.

Information Required

This is some of the information we will need you to bring to help us prepare your income tax return:

– Stocktake details as at 30 June and advise any obsolete stock to write-off.

– Debtors listing (including a list of bad debts written off) as at 30 June. Note:  In order to claim a deduction, the debt must be written off on or before 30 June.

– Creditors listing as at 30 June.

– Fixed asset listing at 30 June noting any assets no longer used and which should be written-off.