June 30 tax tips that add up!
How did 30 June roll around so quickly? It’s nearly tax time again, so it’s time to start thinking about opportunities to help manage your 2019 tax liability.
Here are a few tips to help you on your way.
1. The instant asset write-off
The Government has increased the instant asset write off to cover depreciable assets up to a cost of $30,000. They have also significantly widened the scope of the concession, allowing businesses with a turnover of up to $50m to access the write off. These changes came into effect from 2 April 2019.
For the period prior to 2 April 2019, businesses with a turnover under $10m will still be able to obtain a full tax deduction for depreciable assets with a cost of less than $25,000 (between 29 January 2019 and 2 April 2019) and $20,000 (1 July 2018 to 28 January 2019).
Putting some thought into the capital needs of your business and making the required purchases prior to 30 June can help to lower your tax liability for the current tax year.
Examples of assets that may qualify for the deduction include:
motor vehicles
small manufacturing plant and equipment
restaurant kitchen equipment
calculators
computers and software
desks, chairs and lamps
filing cabinets and bookshelves
hand tools or power tools
protective items, such as hard hats, safety glasses, sunglasses
professional libraries
safety equipment
technical instruments.
2. Understand applicable company tax rates
Last year’s tax rate of 27.5% for companies with turnover under $25m now applies to companies with turnovers up to $50m. This is good news for SME companies!
If your company now falls under this threshold, make sure you factor in the 2.5% tax cut. When it comes to distributing your profits, also be mindful of your applicable tax rate, as this could affect the franking percentage attributable to your dividends. Companies paying tax at 27.5% need to take care when paying dividends out of income previously taxed at 30% as there could be a danger of trapped franking credits.
3. Get your super payments made
If you want to claim a tax deduction for your superannuation expenses, make sure all payments have been correctly processed before June 30, otherwise the opportunity for a deduction in this financial year passes.
If your superannuation remains unpaid, not only will you not be eligible for a tax deduction, you may also be exposed to penalties.
4. Clean up your debtors
It is good practice to write off bad debts before 30 June as you may be eligible to claim a GST credit and reduce your overall tax liability. A bad debt, or a partial bad debt, can be claimed as a deduction as long as it was included in the business’ assessable income in the current or previous years. The debt must be in existence and it must be more than just a doubtful debt.
Make sure any debts written off are properly documented through your accounting records prior to claiming a tax deduction
5. Keep strong records
Setting up an efficient filing system will save you the headache of searching for records at tax time but, more importantly, will be invaluable if the ATO decides to conduct an audit of your business.
Tax law requires records to be kept for five years, and the ATO has powers to impose fines for not retaining records. With more and more funding being handed to the ATO in an effort to increase government revenues, it is becoming increasingly likely that you will hear from the ATO at some point in the future!