by Richard Stewart
The end of the financial year is almost here, so it’s time to make the most of any tax benefits, and to do what you can to minimise your tax liability for the current year.
Where do I start?
First off, ensure that your personal and your business affairs are separated. This may involve separating your receipts and invoices, or making sure the bank statements for your business bank account are separate from those for your personal bank accounts.
Timing of income and deductions
You can minimise your tax liability for the current financial year by incurring deductions this year and deferring the derivation of income until next year. Deductions can be incurred by spending on necessary items such as stationery or maintenance, or by making a donation.
Defer the derivation of income by, for example, issuing invoices on 1 July rather than 30 June, so that the invoiced amounts become income derived next financial year.
Also, if you’re selling plant and equipment or other capital assets, consider the contract date. Capital gains from CGT events would be derived in the current financial year if a contract for the sale is dated 30 June, whereas the income would be derived next financial year if the same contract was dated 1 July.
A debt can be considered ‘bad’ in several circumstances, but generally it means that there is little or no likelihood of the debt being recovered.
If there’s any good news about bad debts, it’s that they’re generally tax deductible. For this reason, now is the time to look at your trade debtors – are there any invoiced amounts for which there is little or no likelihood of recovery? If so, you should bring these to account as bad debts prior to 30 June, and claim them as a tax deduction this financial year.
Ensure that you properly bring to account, and claim, all your depreciation expenses. In this regard, keep in mind the availability of immediate write off for certain assets costing less than $1,000.
Other depreciating assets can generally be pooled together and treated as a single asset for depreciation purposes.
• Carefully examine any loans from private companies with which you’re associated – such loans can be ‘deemed dividends’, in which case the amount of the loan is treated as part of the recipient’s income;
• If you carry trading stock, consider allowing your stock on hand to run down for the end of year. If the difference in value between your opening and closing stock for the year is $5,000 or less, you don’t need to account for trading stock. If your closing stock value exceeds the opening value by more than $5,000, the difference will be assessable income.
It’s not all about tax
Always remember that any business decision you make should be made for the right reasons, and never simply for the sake of a tax benefit.
Seek expert assistance
If you need help with tax planning, or want some further information, consult your accountant or registered tax agent – the cost is tax deductible, and this will ensure sound tax planning, both for now and for the financial year ahead.
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