Tax, Write-Offs, Deductions and 30 June Planning

Small Business Tax Threshold increased

In the May 2017 budget, the cap for what is deemed a small business was amended. Previously $2 million turnover, it has now been increased to $10 million turnover. Turnover is your sales exclusive of GST.   This means that more than 90,000 more Australian businesses can access a number of small business concessions.

$20,000 instant write-off given another year

Also as part of the May 2017 budget, the $20,000 instant write-off was extended until 30 June 2018 (extended by a year).   This means that a business asset is immediately deductible; that is, it can be claimed fully in the year it was purchased (and ready to be used immediately in the business).  It does not need to be allocated to a pool and claimed at 15% in the first year and 30% thereafter, but fully in the year, making deductibles larger, and taxable income possibly less. Second-hand goods do quality and you can claim the $20,000 deduction more than once.   If the asset has a mixed use (ie business and personal) then only the business component is claimable.  There are some items (ie capital works) which are excluded so talk with your accountant to clarify or give us a call at Tax Depot.

Getting it right with your Trusts

Trustees (or in the case of a trustee company, the Directors) need to make a decision about distributions by 30 June, not three, six or a year later when the tax returns are being prepared.   These decisions need to be documented in writing by 30 June 2017.   If there is not a valid resolution in place by this time, then the income may be assessed as belonging to the default beneficiary (assuming the trust deed provides for this).   It’s not critical that distributions are paid by 30 June, simply that the decision has been made and documented.

Work-related expenses are an ATO target

Yes, the ATO target many things, and one of these is work-related expenses, such as travel expenses.   Large claims will draw the attention of the ATO and have them investigate you.   You cannot simply claim an allowance without some justification.   You need to have documentation kept (and available).   If the ATO deem your claim excessive, you can respond, but you need to have proof and a case, ideally substantiated with receipts and documentation.    Unsure about this – again, ask your accountant as s/he is fully trained in the requirements of the ATO and how (and how much) can be claimed.

Tax Planning

Tax Planning is not an excuse for your accountant to send you another invoice; there is good purpose for it.  Ideally, tax planning occurs before 30 June (usually April to June) and will encompass a number of strategies.   It may be that you have ‘outgrown’ your current structure, particularly if you are a sole trader or partnership.   As above, trust distributions need to be decided upon and the only way to do that is know how you are sitting.   If you are to put more money to super or make other tax minimising decisions, often these actions (such as paying super) absolutely have to occur before 30 June.   They often cannot be backdated to 30 June some months later.  If you haven’t done tax planning with your accountant, call us today on 1300 722 955 and we’ll look at where you are at, explain it in English (rather than Accounting technical talk) and set you on a plan to achieve your tax, financial and business goals.

Reminders for your bookwork leading up to 30 June

For those of you doing your own bookkeeping, or even if you have an in-house bookkeeper, here are some tips:

  • Ensure the bookkeeping is actually up to date; all reconcilable accounts are reconciled now to at least 31st May 2017 and June will be completed in a timely manner.   If you are several (or more months) behind, call us, we can help.
  • Ensure that accounts called ‘suspense’ or ‘miscellaneous’ have nothing in them.   Your accountant cannot allocate something on your tax return to ‘miscellaneous’ or ‘general’ (there are no ATO labels for these) so it will have to be allocated; better you do that, or if you are stuck, ask your accountant where to allocate.
  • Review your asset register, and if something has ‘died’ or been lost or is obsolete, then have it written off the asset register and be sure to alert your accountant.   The balance of the value of the item will be claimed and the item then removed for depreciation purposes.
  • Bring forward any expenses or repairs or services to occur before 30 June.   If your work vehicles are due for a service in early July, have them done in June and claim the deduction now, rather than waiting almost a year.
  • Stock up (reasonably) on office supplies, stationery, printer toner etc.   Don’t go overboard but certainly if you are showing good profits, action those deductions.
  • Super (for yourself or staff) needs to be in the hands of the super fund by 30 June.  That doesn’t mean sending the payment on 30 June or 1st July or 27th July, but ensuring the funds have cleared your account by 30 June.
  • Setup your business budget for the upcoming year.

At Tax Depot, we service Logan, Springwood and Beenleigh clients in all areas of taxation, tax planning, bookkeeping and business accounting services.   If you need assistance or advice from our CPA qualified accountants, call us today on 1300 722 955; we would be only too happy to discuss how we can help you and your business.

Noel Ryan BCOM CPA

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