Tax planning can help you achieve your personal and business goals – but to be truly effective it is best to plan throughout the year via regular catch ups with your accountant. If you’re a small business, it’s also particularly important to use these catch ups to keep up to date with any changes that occur (particularly off the back of the Budget) before this financial year comes to a close.
To get you started, here are a few ways to help minimise your business tax for 2018:
1. BENEFIT FROM “SMALL BUSINESS ENTITY” CONCESSIONS
- Small businesses have access to a range of ATO tax concessions
- As part of the Government’s Ten Year Enterprise Tax Plan, the small business entity turnover threshold was increased to $25 million from 1 July 2017 (up from $10 million in the previous financial year)
- Make sure you qualify as a “Small Business Entity”:
- have an aggregated turnover (your annual turnover plus the annual turnover of any business connected / affiliated with you) of less than $25 million; and
- ensure you were operating as a business for all or part of the 2018 year
2. EMBRACE THOSE EXPENSES
- Spend that money now and take advantage of claiming the deductions this year!
- Purchase consumable items (these could include marketing materials, consumables, stationery, printing, office and computer supplies) before 30 June 2018.
3. MAKE THE MOST OF DEDUCTIBLE SUPER CONTRIBUTIONS
- 2018 financial year concessional superannuation cap is:
- Be mindful of this cap so you avoid paying any additional tax.
Note: employer super guarantee contributions are included in these caps. For the contribution to be counted towards the employee’s 2018 contribution cap, it must be received by the fund by the end of this financial year.
4. PAY EMPLOYEE SUPER NOW
- To claim a tax deduction for this financial year and maximise your cash flow, make sure your staff superannuation payments are received by the super fund or the Small Business Superannuation Clearing House (SBSCH) by 30 June 2018.
- Keep in mind that last minute super payments may incur processing delays that can cause them to be received after year end.
- Get in early – and if you would like to claim any last minute payments we suggest you contact your accountant for guidance.
5. MAKE A CALL ON THOSE BAD DEBTS
- A deduction can be claimed for a bad debt when a genuine commercial decision has been made that the debt is no longer recoverable.
- With this in mind, prepare a management meeting document detailing each Bad Debt and enter them into your accounting system before 30 June.
- This ensures there is evidence of these debts being written off prior to year-end.
6. CARRY OUT REPAIRS & MAINTENANCE NOW
- Does your business need any repairs and maintenance (business, rental property, employment)?
- Do these before 30 June in order to claim deductions.
7. TAKE ADVANTAGE OF THE REDUCTION IN COMPANY TAX RATES FOR SMALL BUSINESSES
- The company tax rate for small businesses with less than $25 million turnover has decreased from 30% in 2015 to 27.5% in 2018.
8. REVIEW YOUR ASSETS AND CLAIM INSTANT DEDUCTIONS
- When did you last review your asset register?
- If your business is a Small Business Entity (point 1), you are entitled to the following tax concessions:
- Depreciating assets <$20,000 are immediately deductible;
- Depreciating assets >$20,000 will be depreciated altogether at a rate of 15% in the first year and 30% for future years; and
- If your total pool balance at the end of the year is less than <$20,000 before applying any other depreciation deduction, the entire balance is deductible.
If your business is not a Small Business Entity, all assets purchased over $300 should be depreciated and all assets $300 or under should be deducted.
9. MANAGE YOUR CAPITAL GAINS & DEFER INVESTMENT INCOME
Instead of selling any investments or capital assets this financial year, try to arrange for the receipt of your Investment Income and the Contract Date for the sale of any Capital Gains assets to occur next financial year. Essentially deferring your tax liability.
10. MOTOR VEHICLE EXPENSES & BULKY TOOLS
- Are you set to receive the best tax deductions for your motor vehicle this year?
- Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period.
- Gone are the days where you need a manual log book in the glove box, filled out after every trip and a car floor full of petrol receipts!
- There are a range of smart phone apps that satisfy the requirements of the ATO.
- The apps will track your travel through your smart phone and some of them will even allow you to store all of your vehicle expenses, such as petrol receipts, in the app. This will ensure you never miss a deduction!
- Trips between home and work are generally considered private, except when you are carrying bulky tools.
- Eligibility requirements:
- Bulky tools are needed
- Expected to carry your tools to work
- No secure storage space at place of work
- Not enough to simply carry a few tools.
11. DEPRECIATE THAT INVESTMENT PROPERTY
- Do you own any rental properties?
- Arranging a Property Depreciation Report means that you will be able to claim the highest amount of depreciation and building write-off deductions on your rental property.
12. STOCKTAKE TIME
- Compile a comprehensive Stocktake listing as at 30 June 2017 (if this applies to your company).
- Review and write-off any obsolete or worthless stock items.
13. SMALL BUSINESS CONCESSIONS – PREPAYMENTS
- “Small Business Concession” taxpayers can pre pay for up to 1 year on expenses (like loan interest, rent and subscriptions) before the end of the financial year and benefit from a full tax deduction in the next year.
- Talk to your accountant about how the proposed changes to the tax rate of SBE companies could make prepaying expenses a great saver of tax now as opposed to next year.
Finally, sit back and really take the time out to reflect your business. Did you perform like you wanted to? If not what do you think could be changed for next financial year? Set some goals and consult with your business advisor to really gain insight and take control of your outcomes!
An Important Message
While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.