Year End Tax Planning
Now is the time to act and focus on your tax and financial planning in order to minimise tax, reduce risk, and be prepared financially for the year ahead. Effective tax planning is something that should be considered year round and by making it a priority could result in you paying less tax liability. By preparing and updating a forecast of income and outgoings, businesses can identify times when money may be short and plan according.
With the end of tax year nearing, it is crucial to complete any last minute tax planning sooner rather than later.
The current tax year ends on June 30 so it is a good idea to get in touch with your financial adviser, tax agent and business partners to ensure that you have everything in order.
Tips for Property Investors –
- If you travelled to inspect your investment property, record your kms travelled in your car as these are deductible.
- Pre-paying any interest on a loan can be beneficial to those investors who have sufficient funds to do so as a deduction can also be claimed for this. Also pre-paying upcoming property insurance premiums can allow a deduction to be claimed.
- Bringing forward any maintenance work that is required so it occurs before June 30 can assist with minimising your tax bill.
- A qualified quantity surveyor inspects a property and prepares a depreciation report which can then be used in your tax return. As the property investor, you can claim the depreciation of the investment property against taxable income.
- SMSF’s are able to borrow to invest in property, creating opportunities to acquire assets and increase fund investments. There are strict rules that need to be considered before making any purchase using this strategy.
Tips for Business Owners –
- Keeping on top of your records is important to avoid falling behind. If you have already got your documents ready then that is great, but for those of you who are yet to do so, we advise you make a start and get it to your accountant as soon as practicable.
- Any sales that are likely to become a bad debt should be formally written off against your financial records. This bad debt can then be claimed as a deduction against your taxable income and may require providing evidence to the ATO to support that reasonable steps were taken to recover these amounts.
- Retailers and wholesalers are required to perform a stocktake at year end. If your annual turnover is less than $2 million and the difference in value between your opening and closing stock is reasonably estimated as less than $5,000, then you are exempt from this requirement.
- If you qualify as a small business, you may wish to immediately write off the value of certain business assets less than $20,000. Any assets over this threshold can be calculated as a single pool that depreciates at 15% in the first year and 30% every year after (this rule is not applicable to some assets and should be confirmed with accountant prior).
- Ensure that superannuation entitlements for employees are paid by 30 June 2015 in order to be tax deductible. However, you should check that the amounts paid for the full financial year do not exceed the maximum concessional amount for each employee.
Tips for SMSF’s –
- There are significant tax impacts for those Self-Managed Super Funds whose members have not withdrawn their minimum pension figures. It may be worth contacting your accountant to find out what your minimum amount is and whether it has been met.
- All contributions to the fund must have been received by the SMSF no later than 30 June 2015 and deposited into the relevant super fund bank account.
- Concessional (deductible) super contribution caps have now increased to $30,000 for people under age 50, and $35,000 for those people over age 50. Make the most of these caps by salary sacrificing into super.
- From the age of 55 you can start a transition to retirement pension from your superannuation fund. Delaying this transition could mean that you miss out on benefiting from any franking credits refunds and the opportunity to convert taxable investment income in your fund into tax-free earnings. If you are still working, the pension you initiate can be a restricted transition to a retirement pension, or unrestricted if you have no plans to work again.
- If you have already started a pension it may be worthwhile to consider a withdrawal and re-contribution strategy to enhance the tax-free component of you super. This option provides advantages where you anticipate beneficiaries inheriting a portion of your super.
Strategies to reduce your Capital Gains Tax (CGT) Liability –
- In previous years where a significant capital gain was incurred, it may be beneficial to consider disposing of an asset that will yield a capital loss. This capital loss can then be applied to offset your tax liability from any capital gains.
- Postpone the disposal of an asset that is expected to make a large capital gain to a year where you expect to have lower taxable income.
- Making use of CGT concessions such as the retirement exemption, the 15-year exemption, the 50% active asset reduction and the CGT rollover. These concessions in some cases can be extremely effective in reducing your CGT bill.
- Planning a CGT Strategy in advance can save you a huge amount on your tax bill in the event no planning had previously been done.
- Carrying forward capital losses from past financial years can offset capital gains in the current year.
Additional Areas of Scrutiny by the ATO –
- Any deductions you are claiming for personal technology such as smartphones, tablets and laptops should have sufficient documentation to support the breakdown of personal/work usage. Deductions may only be made for the professional portion of usage.
- Businesses that operate off the books and fail to correctly record cash transactions (such as paying employees in cash to avoid minimum wage and super guarantee) to reduce the overall tax liability will be closely monitored.
- Any large deductions for work-related travel costs will be subject to additional examination by the ATO. The tax office has warned that it will be targeting the validity of the deductions claimed for the transportation of large tools and equipment.