Tax Planning for Business:
With the end of financial year fast approaching, now is an appropriate time to review the financial performance of your business and to ascertain the projected tax situation for you. Detailed here are some income tax planning initiatives that you may consider prior to 30 June 2014 which will help minimise your tax payable. Most of these initiatives are tax concessions available for small businesses. A small business is defined as a business with a turnover of less than $2 million.
Expenses: Can you prepay any business expenses prior to 30 June? You can claim an immediate deduction on certain expenses for example, travel expenses can be prepaid.
Debt: Have you issued any invoices that have not been paid? Are they bad debts? These will reduce your taxable profit.
Equipment: Any equipment purchased prior to 30 June 2014, which is under $6,500 can be written off straight away. Equipment purchased above $6,500 has to be depreciated over a number of years.**
Vehicle: If you buy a car you can get the first $5,000 deduction straight away. Then the balance of the cost of the car is depreciated over a number of years.**
**Please note the ATO has announced this concession will be removed. There has been no formal date of when as yet.
Bank Interest: Can you check with your bank to see if you can prepay interest on your business loans prior to 30 June? This is also available for interests on investment loans
Your Super: Look to maximise superannuation contribution. The maximum that can be deducted is $25,000 per person, if you are under the age of 60. If you are over 60 years old, it is $35,000.
Staff super: If possible pay your staff superannuation prior to 30 June 2014. Any unpaid super as at 30 June is not tax deductible until it’s actually paid.
Trading Stock: You will not have to account for changes or do a stock take of trading stock where the difference between opening and closed stock is $5,000 or less
Depreciation: Review your depreciation schedule for obsolete and or scrapped items. Also make sure the highest depreciation rate is being used.
Donations: Donations need to be made prior to 30 June, also needs to be paid to a tax-deductible charity
Construction Cost: Construction cost of commercial building can be written off at 2.5%
Home Office: Expenses for maintaining a home office can be claimed
PAYG: Review your financial statements to calculate if your PAYG instalment for the June 2014 quarter can be varied.
If you would like us to review your business performance, determine the appropriate mix of gross salary (including corresponding PAYG withholdings) and superannuation contributions which may be made this year, and also discuss how the above initiative can benefit your business, please contact us.
Tax Planning for Individuals:
If you don’t have a business there are individual tax planning initiatives to consider prior to 30 June 2014.
Investment properties: Investment property owner can claim a number of expenses against rental income, including, but not limited to, agents fees, repairs & maintenance, travel costs, interest on loans, real estate fees, depreciation of fixtures, fittings, plant & equipment, pest control, bank charges on loan, cleaning, electricity, rates, land tax and insurance.
Home office: Expenses for maintaining a home office can be claimed
Insurance: Insurance for sickness and accident cover are tax deductible. Payments can be made by the employer which incurs FBT
Work Expenses: Work related expenses such as travel, uniforms, laundry of clothes, subscriptions, union fees and self education are deductible if paid for prior to 30 June 2014.
Documentation: There are a number of rules regarding substantiation of particular deductions. Make sure you have the correct documentation for these claims (eg log books, travel diaries)
If you have any queries regarding the above list, please contact us.