End of Financial Year Tax Planning Tips

It's always almost that time of year again! The end of the financial year. Here are a few tips worth considering at any time of the year.

Please find below a few tips for small business and their owners on preparing for the end of the financial year.

For Business

• Depending on your situation, consider deferring income if you are assessed on a cash basis or if you are assessed on an accrual basis, defer the derivation of income.
• Pay superannuation entitlements before 30 June to get the deduction.
• You may be able to realize assessable losses by scrapping obsolete plant and machinery before June 30th.
• Capital Gains – If you can, defer the realization of a capital gain until after June 30th.
• Revalue trading stock at the lesser of cost, market value or replacement value.
• Write off bad debts by June 30th. Don't forget to make the GST adjustment.
• If you intend to pay director's fees or staff bonuses, remember that the company must make a definite commitment by passing an authorised resolution. For tax purposes you cannot pay them in the following income year.
• Be careful to check the details of any loans to shareholders. If not set up correctly they may be deemed by the Tax Office as unfranked dividends paid to the shareholder by the company.
• Review loans by shareholders to a company : - At calls loans may be deemed to be equity and can cause problems upon repayment.
• If capital gains are already realised, review other activities to identify any capital lossess.
• Prepay company expenses up to 12 months in advance.
• For those operating a Personal Services Business, ensure that you have satisfied the provisions with respect to Personal Services Income including the 80/20 rule.
• Company tax rate for the year ended 30th June 2005 is 30%.
• Other issues to consider include the recoupment & transfer of losses; thin capitalisation; work in progress; blackhole expenditure; foreign exchange rules; project pools; tax consolidation and the Simplified Tax System.

For individuals consider:

• With the proposed tax cuts announced in the recent Federal Budget, it would be an idea to consider deferring your income to future tax years.
• Reallocating profits or salary into superannuation can reduce your tax liability by up to 33.5c in the dollar (48.5% v 15%) – this is especially relevant with the proposed cancellation of the superannuation surcharge announced in the recent Federal Budget.
• Start a wealth creation portfolio, using a tax effective investment with a Tax Office Product ruling.
• Prepay interest on margin loans and investment properties.
• Get depreciation schedule (also known as a quantity surveyor's report) for your investment property.
• Government co-contributions – if you earn less than $58,000 per year the government is willing to match your superannuation contributions dollar for dollar up to a maximum of contribution of $1,000 per year.
• Consider making a contribution to your dependant spouse's superannuation. If your spouse earns less than $13,800, you can make a contribution to their superannuation and be eligible for an income tax rebate.
• Review your salary package to ensure you have minimised your overall tax position.
• Capital gains – reduce any capital gains made by crystallising cpaital losses before 30 June.
• Get your 13 week log book completed to maximise your claim for work-related motor vehicle expenses.
• Don't forget to claim your net medical expenses over $1,500.00.

The above list is to get you started, please consult your tax accountant before making any decisions.

But most importantly ...make sure you keep all receipts as no receipt = No deduction!

Disclaimer:

No investment advice provided to you.
This web site is not designed for the purpose of providing personal financial or investment advice. Information provided does not take into account your particular investment objectives, financial situation or investment needs.

You should assess whether the information on this web site is appropriate to your particular investment objectives, financial situation and investment needs. You should do this before making an investment decision on the basis of the information on this web site. You can either make this assessment yourself or seek the assistance of any adviser.