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Tax Planning Strategies: Business

The end of the 2015/16 financial year is almost here, so now's the time to review what strategies you can use to minimise your tax.

#1 | Concessional Superannuation Cap

The concessional superannuation cap for 2016 is $30,000 per year for persons under 50 as at 30/6/16, and $35,000 for persons age 50 to 75. Do not go over this limit or you will pay more tax!

Note that employer super guarantee contributions are included in these caps. Where a contribution is made that exceeds these limits, the excess is taxed to the fund member's account at an effective rate of 46.5%.

In order to claim a tax deduction in the 2016 financial year, the super fund must receive the contribution by 30 June 2016.

Please contact us to verify that you can comply with all the eligibility criteria for this deduction. This includes satisfying the 10% test, meaning that less than 10% of the total of your income for the year must be in respect of your employment. For the purposes of this test, income is assessable income plus reportable fringe benefits plus reportable employer superannuation contributions.

#2 | Asset Depreciation

If your business is a Small Business Entity (turnover less than $2 million), then the following tax concessions apply:

Depreciating assets (including motor vehicles) valued at less than $20,000 will be immediately deductible

Depreciating assets valued at more than $20,000 will continue to be deduction over time using a small business pool.

#3 | Tools of Trade / FBT Exempt Items

The purchase of Tools of Trade and other FBT exempt items for business owners and employees can be an effective way to buy equipment with a tax benefit. Items that can be packaged include Handheld/Portable Tools of Trade, Computer Software, Notebook Computers, Personal Electronic Organisers, Digital Cameras, Briefcases, Protective Clothing, and Mobile Phones.

If structured correctly, the Employer will be entitled to a full tax deduction for the reimbursement payment to the employee (for the equipment cost), and the employee’s salary package will only be reduced by the GST-exclusive cost of the items purchased.

You should buy these items before 30 June 2016.

#4 | Employee Superannuation Payments

To claim a tax deduction in the 2016 financial year, you need to ensure that your employee superannuation payments have CLEARED your business bank account by 30 June 2016.

For any last minute superannuation payments, we recommend that you arrange for a BANK CHEQUE made payable to your employee super fund prior to 30 June 2016.

Also, check that your payroll system will be paying the required 9.5%.

#5 | Defer Income

Where practical, defer issuing further invoices and/or receiving cash/debtor payments until after 30 June 2016.

#6 | Bring Forward Expenses

Purchase consumable items BEFORE 30 June 2016. These include stationery, printing, office and computer supplies.

#7 | Repairs & Maintenance

Make payments for repairs and maintenance (business, rental property, employment) BEFORE 30 June 2016.

#8 | Defer Investment Income & Capital Gains

If practical, arrange for the receipt of Investment Income (e.g. interest on Term Deposits) and the Contract Date for the sale of Capital Gains assets, to occur AFTER 30 June 2016.

The Contract Date is generally the key date for working out when a sale occurred, not the Settlement Date!

#9 | Motor Vehicle Log Book

Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2016. You should make a record of your odometer reading as at 30 June 2016, and keep all receipts/invoices for motor vehicle expenses.

#10 | Investment Property Depreciation

If you own a rental property and haven’t already done so, arrange for the preparation of a Property Depreciation Report to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property.

#11 | Private Company (“Division 7A”) Loans

Business owners who have borrowed funds from their company must ensure that the appropriate principal and interest repayments are made by 30 June 2016.

#12 | Year End Stock Take / Work in Progress

If applicable, you need to prepare a detailed Stock Take and/or Work in Progress listing as at 30 June 2016. Review your listing and write-off any obsolete or worthless stock items.

#13 | Write-off Bad Debts

Review your Trade Debtors listing and write off all Bad Debts BEFORE 30 June 2016. Prepare a minute of a Directors’ meeting, listing each Bad Debt, as evidence that these amounts were actually written off prior to year-end.

#14 | Small Business Concessions - Prepayments

“Small Business Concession” taxpayers can make prepayments (up to 12 months) on expenses (e.g. Loan Interest, Rent, subscriptions) BEFORE 30 June 2016 and obtain a full tax deduction in the 2016 financial year.

#15 | Trustee Resolutions

Ensure that the Trustee Resolutions are prepared and signed BEFORE 30 June 2016 for all Discretionary (“Family”) Trusts. Please see us for more information about these resolutions.

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