With the uncertainty surrounding the federal election (and Labor’s proposed changes to the legislation) now behind us, we can turn our attention to tax planning strategies to help optimise your overall tax position leading into the end of financial year.
The various tax planning strategies have been highlighted in this blog under the following areas:
- Capital Gains & Losses
- Instant Asset Write Off
- Post 30 June Tasks
The following list of tax planning opportunities is not exhaustive and we urge you to contact NCA to discuss any strategy you are planning to implement before 30 June 2019.
- Timing of earning income:
- Where appropriate, and if it will not adversely impact on your cash flow, consider whether income can be deferred
- Or if you are in a tax loss, can you bring income to the current year
- Lump sum amounts: Where a lump sum is (or has been) received close to year-end, you should be examining whether any of those amounts can be spread over future periods
- Trust distributions – consider distributions to beneficiaries with lower marginal tax rate
- Bring forward deductible expenses where appropriate
- Prepayment of Expenses:
- In some circumstances, small business entities (SBE) and individuals who derive passive type income (such as rental income and dividends) should consider pre-paying expenses prior to 30 June 2019.
- A tax deduction can be brought forward into this financial year for expenses like insurance premiums, subscriptions and memberships, travel, advertising and interest.
- A deduction for prepaid expenses will generally be allowed where the payment is made before 30 June 2019 for services to be rendered within a 12 month period.
- Superannuation Guarantee Contributions (SGC):
- SGC for the June 2019 quarter is not required to be paid until 28 July 2019.
- If you want a tax deduction in the 2018/19 year the superannuation fund must receive the contribution by 30 June 2019.
- The Tax Office deems a contribution made by electronic transfer is not paid until the amount is actually credited to a super fund’s bank account. So don’t leave the payment to the last minute.
- Bad debts:
- Review doubtful debts before 30 June to consider whether these items can be written off as bad debts before year-end in order to claim a tax deduction.
- Write-Off Bad Debts – you should physically write off bad debts from your debtors system before June 30 to be able to claim a deduction.
- A Bad Debt is an amount that is owed to you that you consider is uncollectable or it is not economically feasible to pursue collection.
- Staff bonuses:
- You may be able to bring forward staff bonus provisions if the policies are approved before year-end and are made unconditional.
- Gifts and donations:
- A gift of cash or property to an appropriate Deductible Gift Recipient may be deductible if made prior to 30 June 2019. If you were already considering making a donation you may want to do this prior to 30 June 2019 and offset it against your taxable income.
Capital Gains & Losses Consider crystallising any unrealised capital gains and losses prior to 30 June to improve your overall tax position for the financial year. Instant Asset Write-Off As of 2 April 2019, business entities with an annual turnover of less than $50m are eligible to immediately write off the cost of capital assets that cost up to $30,000. If you are considering capital investment in your business, ensuring the asset is purchased and installed ready for us prior to 30 June will provide your business with this immediate tax deduction. Note this incentive has been extended by the Government to 30 June 2020.Superannuation The concessional superannuation contribution limit for the 2019 financial year is $25,000, meaning eligible individuals can claim a tax deduction up to this amount for contributions that are made into their superannuation fund during the financial year (can be a combination of employer or personal contributions). We suggest you speak with NCA’s Superannuation Specialist (Hayley Matcham) should you have any queries. Post 30 June Tasks In addition to the annual tax planning strategies, there are also a number of key tasks that may need to be performed by your business post 30 June. These include:
- PAYG Payment Summaries:
- Employee payment summaries need to be provided to employees by 16 July 2019 either electronically or via paper forms
- The annual summary report is due for lodgement with the ATO by 14 August 2019
- Taxable Payments Annual Report:
- For businesses in certain industries (building and construction, cleaning services & courier services) you will need to complete a TPAR detailing payments made to contractors throughout the year and include details for GST and PAYG withholding. This report is due 28 August 2019.
- Be prepared for Single Touch Payroll (STP), which will come into effect for all businesses from 1 July 2019. Check out our blog here for more information on STP.
- Data File (Xero/ MYOB etc) Reconciliations:
- Prior to providing your accountant with your 2019 data file you will need to reconcile a number of items including but not limited to:
- Bank accounts
- Debtors & creditors
- Stock (Do a stocktake, ensuring to write off any obsolete stock)
The above list of tax planning opportunities is not exhaustive and we urge you to contact your relationship manager at NCA on 09 9387 0000 to discuss any strategy you are planning to implement before 30 June 2019.