Last week SmartCompany compiled a panel of experts to bring you 15 tax tips from industry experts – but that hardly seems enough to cover all you need to know.
Here are another 15 tips on how to maximise your end of financial year position.
This is perhaps the most common tool entrepreneurs use to claim tax relief – deprecation. Many big-ticket assets may be subject to depreciation, and could give you a significant tax boost. For now, most depreciating assets costing less than $1,000 can be written off immediately.
Our experts say you need to keep a record through the year of what will be eligible for depreciation, and then organise it all before you submit returns.
However, there is one aspect of depreciation you may not be aware of – while the ATO provides its own depreciation schedules, there is some room to use your own. But our experts say you need strong grounds to do so, so check with your accountant.
Much has been made of the Government’s recent crackdown on trusts, and the experts say entrepreneurs need to be aware this is the final year in which you can distribute income tax-effectively to children.
The Government argues that although the increase in the low-income-tax-offset over the past 10 years has delivered some help to low-paid workers, it has also resulted in some high-income earners avoiding tax.
But there is another aspect of the trust system entrepreneurs should be aware of. Tristan Webb says the recent Bamford High Court decision means the way some trust deeds are written may require some updates.
“Trusts can stream income to beneficiaries, and it will retain its tax character in the hand of those beneficiaries. But what this case highlights is that many people haven’t checked their deeds to see if they can actually do this,” Webb says.
“Deeds have to have a specific streaming clause and an income clause that will allow it to stream capital gains to beneficiaries.”
Webb says trust members need to review their documents and ensure they have appropriate clauses. “Many wrote them in the 70s and they haven’t been updated at all,” he says.
Manage an investment property? There are plenty of forms and other documents you need to get together ahead of June 30, and you don’t want to miss out on any of them and risk paying some extra tax.
Bank statements, receipts, income summaries, depreciation schedules, valuation reports and an income summary report from property managers are just some of the documents you’ll need. Check with your tax agent, and make sure you don’t miss out on a single form.
There are also deductions you can claim if you’re renting out a property. Some of these include:
And there are more: you should also be aware that for buildings constructed after 1982, there is a 2.5% straight line deduction for work such as structural improvements.
Depreciation can also be forgotten, so check with your tax agent to determine which rental deductions apply to you – you may be eligible for some you’re currently unaware of.
Another tax break many entrepreneurs forget is the benefit of income protection insurance. If business owners purchase income protection before the end of the financial year, business owners can actually claim it back in the same year’s tax return.
The other benefit of this is if you pay in advance, you’ll receive a tax deduction – and the same goes for workers’ compensation insurance as well.
If you’ve got some invoices you’re planning on sending out – don’t.
Our panel says your tax burden may increase if you send some invoices out and don’t receive payment by the end of the year.
“Hold back on initiating invoices,” Webb says. “When you send them out you’re deemed to have derived your income at that point.”
“Some businesses are taxed on a cash basis, but most are on an accruals basis. So if you issue the invoice just before the end of the year, you pay tax on that even though you haven’t receive the cash yet. You’re better off just waiting.”
It may be an upsetting topic, but if your company needs to make some redundancies before the next financial year, now is the time to do it. Sharon Burke says your company may receive some tax relief for doing so.
“This is something else that some businesses may want to look at in certain circumstances. It’s a little less happy, but if you look around your company and are able to make some people redundant, it is deductable in the year in which the redundancies were made.”
There are plenty of superannuation tips to remember, but a key one is you can receive benefits for making contributions to your spouse’s account.
Mercer financial adviser Michelle Smith says you can be eligible for a tax refund of $540 for making contributions of at least $3,000 on behalf of your spouse.
“This is an effective strategy to get more into your spouse’s super fund if they’re working part-time, for instance, as it offsets any tax.”
“But it only applies if your spouse is earning less than $10,800 per year, or earning a maximum of $13,800 per year before the tax offset shades out.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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