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Business Tax Planning Strategies The end of the 2010/11 financial year is almost here, so now's the time to review what strategies you can use to minimise your tax. We all know that we need to submit a tax return each year following 30 June. What many of us often miss out on however, are the steps that can be taken before this date to save on tax payable and capitalise on any opportunities that may have been created throughout the year. Here are four key areas of opportunities and risks that can be identified and addressed before the end of the financial year: 1. Know the impact of new or changed rules There can often be significant developments in legislation and tax rulings made throughout the year (or year prior) that will impact this year's return. Knowing what these changes are and making sure you have responded can lead to tax savings and avoiding unnecessary scrutiny. One example of this year are distributions to companies from trusts. The tax treatment of these distributions has changed in the past 12 months, and if you have a trust, or intend to have a trust that utilises a company as part of the tax structure, it is important to review your situation prior to the end of financial year. 2. Be aware of ATO focus Each year the ATO release details of crackdowns on any types of activity that have regularly caught their attention. The ATO is currently very active with conducting benchmarking analysis to crack down on ‘the cash economy'. This process involves benchmarking businesses, based on profitability indicators, against other businesses in the same industry. Where a business falls outside these indicators, a please explain or request for details on record keeping is issued. 3. Investments & Superannuation By reviewing your investments before 30 June, you will be in best position to manage any CGT gains or losses you may have, by realising them in the current year if applicable. Your personal superannuation position should also be reviewed. It may be an effective strategy to consider salary sacrificing into your super fund. It is also important to consider making non-concessional contributions to your super. These contributions can be made in lump sums up to the $150,000 per annum limit, or if utilising the ‘bring forward rules' up to $450,000. Careful consideration should be applied to this strategy as you will be unable to make non-concessional contributions for the next 2 years, and exceeding contribution limits can attract costly penalties. For business, they must ensure that the 30 June quarter contributions are made before 30 June to be eligible for a deduction. Family owned businesses should also consider making concessional contributions for key individuals. These are a few of the areas that should be carefully planned for before the end of the financial year, as once the calendar flips over the opportunity to maximise your position is lost. 4. Tools of Trade / FBT Exempt Items The purchase of Tools of Trade and other FBT exempt items for business owners and employees can be an effective way to acquire equipment with a tax benefit. Items that can be packaged include Handheld/Portable Tools of Trade, Notebook Computers, Personal Electronic Organisers, Mobile Phones, Digital Cameras, Briefcases, Protective Clothing, and Computer Software. If structured correctly, the Employer will be entitled to a full tax deduction for the reimbursement payment to the employee (for the cost of the equipment), and the employee’s salary package will only be reduced by the excluding GST cost of the items purchased. You should buy these items before 30 June 2011. 5. Defer Income Where possible, defer issuing further invoices and/or receive cash until after 30 June 2011. 6. Bring Forward Expenses Purchase consumable items BEFORE 30 June 2011. These include stationery, printing, office and computer supplies. 7. Repairs & Maintenance Make payments for repairs and maintenance (business, rental property, employment) PRIOR to 30 June 2011. 8. Motor Vehicle Log Book Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12 week period. The start date for the 12 week period must be on or before 30 June 2011. You should make a record of your odometer reading as at 30 June 2011. 9. Investment Property Depreciation If you own a rental property and haven’t already done so, arrange for the preparation of a “Depreciator” Report to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property. 10. Private Company Loans Business owners who have borrowed funds from their company must ensure that the appropriate principal and interest repayments are made by 30 June 2011. 11. Year End Stock Take / Work in Progress If applicable, you need to prepare a detailed Stock Take and/or Work in Progress listing as at 30 June 2011. 12. Write-off Bad Debts Review Trade Debtors listing to write off all Bad Debts BEFORE 30 June 2011. Prepare a minute of a Director’s meeting listing each Bad Debt as evidence that these amounts were actually written off prior to year end. 13. Small Business Concessions - Prepayments For Small Business Concession taxpayers you can make prepayments (up to 12 months) on expenses BEFORE 30 June 2011 (e.g. Rent, Interest on Loans) and obtain a full tax deduction in the 2011 financial year. Talk to us TODAY before the 30 June 2011 deadline for assistance to reduce your tax
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