1. Trust distributions
If you are using a trust structure, then it is important to complete the appointment of trust income before the end of financial year. This is a resolution by the trustee as to who the beneficiaries of the trust income will be. Given the complexity of personal tax rates and the company rate there is some good tax planning available here. There have been some changes introduced by the ATO and we want to ensure that you aren’t caught with any problems here.
2. Taking cash out of your business
If you have paid cash to shareholders or paid expenses on their behalf, then these ‘debts’ need to be repaid to the company by the lodgement date for the company’s tax return, or an agreement needs to be in place to repay the debt. If existing agreements are in place, make sure that the minimum repayments due by 30 June 2015 have been made. If the payments are being made from distributions, the dividends need to be declared and documented before the end of the financial year.
3. Accelerate super
Try and pay your employees’ superannuation contributions for the June quarter before the end of June. This way, you can claim the deduction now rather than waiting another 12 months.
If you’re a Director of the business, you can also top up your own super contributions. Just be concious of the superannuation cap limit.
Superannuation contributions are deductible in the year that the contribution is received by the trustee. Be sure to check how long your payment method takes to process – if you’re paying just before the end of the financial year, the payment may not be received by the Trustees until the new financial year – therefore, the deduction for the contribution cannot be claimed until next financial year.
4. Making the most of plant and equipment deductions
Review your asset register. If you have any obsolete plant and equipment that has no value and you are unlikely to use it in the new financial year, you might be able to claim the remaining tax written down value. You need to scrap the asset before June 30.
If you own a small business with a turnover of less than $2 million, you might be able to claim an immediate deduction for the cost of certain assets under $1,000 prior to 12 May 2015, any assets purchased after this date will be applicable for the $20,000 immediate deduction that was announced in the Federal Budget.
5. Bad debts?
If you have tried everything to recover the debt and you are sure there is no hope of recouping it, you can write-off the debt this financial year and claim it as a deduction. The debt needs to be physically written off to take the write off. This means writing back through your debtors ledger. For any large debts, a director’s resolution could be a good idea.
6. Have you made a profit on any assets or has the value tanked?
If the business has made a profit on the sale of any assets during the year it’s likely you’re going to be hit with capital gains tax. If you have not entered into a contract of sale yet, think about deferring the sale contract until after the end of the financial year to defer the capital gains tax.
On the flip side, if your business has any CGT assets that are worth less than what you paid for them, think about selling them pre 30 June and crystallise the loss. You can use the loss to offset against any capital gains you made throughout the year and reduce the tax you are likely to pay on those gains. You need to make sure the sale contract is entered into before 30 June 2015 to claim the loss this financial year.
7. Taking stock of your stock
You may need to do a stock take, but you can use the stock take to take care of any obsolete or damaged stock that is unnecessarily sitting around. Once identified, you can choose to value the stock at the lower of cost, replacement, or market sale price. And you can use different methods for different items of stock. This means that stock that is completely obsolete or damaged can effectively be written off for tax purposes if it has no value in the market, and claimed as a deduction. The key is to clearly record what you have done.
If your business has a turnover under $2 million, you may not need to do a stock take, as you might be able to use the simplified trading stock rules if the difference between your opening stock balance and your closing stock balance is less than $5,000.
8. Paying directors’ fees or bonuses to your team?
If you intend to pay Directors’ fees or bonuses to your team, you can claim the deduction in this financial year providing the company is fully committed before 30 June. You need to have evidence of this, which could include a director’s resolution and advice to the people affected. The payment does not have to be made this financial year to claim the deduction. The recipients only need to declare the income in the year they receive it, but the company can take the deduction in the year when the commitment is made. A good tax outcome, at both company and personal level.
9. Making the most of related entities
If you’re charging management fees between related entities, make sure the invoices are raised pre 30 June and they are accounted for GST purposes. You also need to make sure that the charges are commercially reasonable, as this is an area that the Tax Office is looking very closely at! There needs to be a commercial reason for the charges.
If you need further advice around the above tips please do not hesitate to contact Rethink Accounting to answer any questions or make an appointment.
*This information is general only. Please consult your accountant to take into account your individual needs.