LAST MINUTE TAX PLANNING TIPS
30 June is almost here once again! If you want to make sure you are doing everything you possible can to minimise tax, consider our 'last minute tax planning tips'.
Take advantage of deductible super contribution thresholds
As per last financial year, the annual concessional superannuation contribution caps are set at $25,000 for persons under 50 years of age and $50,000 for persons aged over 50. Although cash is tight for many businesses, if you are entitled to make deductible superannuation contributions you may wish to take advantage of these thresholds now because it may be harder for you to make deductible contributions in the future. The fund must receive the money by 30 Jun 2011 in order for the contribution to be deductible.
Extra deductions by prepaying expenses
Small business entities (turnover of your business and related parties of less than $2m) or passive investors (rental property or shares) may be eligible to claim an immediate deduction on certain prepaid expenses.
A small business can prepay services like insurance, or an investor could prepay interest and also have the benefit of locking in their interest at a fixed rate for one year. To be eligible, the service period covered by the prepayment must be for a period of 12 months or less.
Clear under performing or loss assets
Have you made a capital gain during the year? If so, you may wish to sell under performing capital gains tax assets in order to offset the resulting losses against realised capital gains.
Review your depreciation schedule and scrap any old assets. Any loss on the scrapping of these assets can be used to reduce other income. Don't forget to undertake a stocktake as at 30 Jun and take into account any stock which is now obsolete.
Defer income or bring forward expenditure
The oldest tax planning strategies in the book involves pushing income into the next financial year and bringing forward expenses into June. Consider delaying the invoicing of income into the new financial year, or if you are planning on making repairs to equipment get the repairs completed in June rather than July.
While both of these strategies are tax effective, keep in mind the effect this might have on your cash flow and future tax years - especially given some of you will be paying the flood levy of up to another 1% in the 2012 financial year.
To be entitled to a deduction for your employees 9% guaranteed super contributions the amount must be paid before 30 June 2011!
If you are considering the payment of bonuses to staff, pay these before 30 June 2011 to get a deduction for the amount in the current financial year.
If you have any salary sacrifice arrangements with staff for the provision of motor vehicles, it would be wise to review these arrangements given the recent changes in Fringe Benefits Tax legislation.
Write-off any bad debts before 30 June 2011. A debt is considered bad when a bona-fide commercial decision has been made that it is no longer recoverable. It is not sufficient for the debt to be merely doubtful.
Review your June 2011 PAYG instalment
If you PAYG instalment for the June 2011 quarter has jumped up considerably, or profits in the 2011 have dropped compared to the previous year, look at varying the instalment. By doing this you would get the cash benefits in July/August rather than waiting until you lodge your 2011 tax returns. Please talk to us before you do this because penalties do apply if you vary the instalment amount too low.
If you have any question, please do not hesitate to contact us.