Key Actions That Business Owners Should Take Before 30 June To Reduce Tax

For businesses to maximise their cash position, they should consider the following tax planning opportunities before 30 June.

Prepay expenses before the end of the year:

  • If turnover is < $10m, you can claim 100% deduction in the year an expense is paid

Bring forward the purchase of plant & equipment if you are a small business:

  • Equipment costing less than $30k, installed and ready for use by 30 June 2019 will be fully tax deductible in the current year

Maximise superannuation contributions:

  • Super is only deductible if paid by 30 June
  • Annual concessional contribution caps are $25k
  • Salary earners can now make concessional member contributions as the previous restriction (10% rule) no longer applies

Write off bad debts:

  • If debts are not recoverable, and all action has been taken to resolve then write off the bad debt before 30 June to bring to account the expense
  • Ensure GST is adjusted

Write off slow-moving or obsolete stock

  • Review your stock holding
  • If the market value is lower than the cost of the stock, a deduction can be realised for the difference

Utilise unrealised capital losses:

  • Ensure you take advantage of capital losses within your group
  • Consider whether distribution minutes can be prepared in a way to utilise group losses

Review plant & equipment:

  • Review depreciation schedule for any scrapped plant & equipment that can be written off
  • Review the effective lives of equipment and consider whether appropriate to increase rate of depreciation

Review remuneration to owners:

  • Are dividends or profit share a more appropriate way to remunerate business owners
  • If the business is making a loss, you could be unnecessarily paying tax on wages

Repayment of Div 7A loans:

  • Cash repayments can reduce the requirement for dividends to be declared

Review tax rate applying to companies:

  • Base rate companies pay tax at 27.5% while all others pay tax at 30%
  • Review any planning that could occur to achieve the desired tax rate (may be lower to reduce tax, may be higher to maximise franking credits on dividends)

11. Claim and document your Research & Development activities:

  • When engaged in R&D activities, clearly document the activities and costs relating to those activities to take advantage of R&D Tax Offsets

Review your tax position prior to 30 June:

  • Understand your options to reduce or defer tax
  • Plan the cash flow for instalments of tax, and the tax due on lodgement of tax returns
  • Identify opportunities to vary tax instalments and improve cash flow
  • Implement above tax planning and other savings
  • Finalise trust distribution minutes before 30 June

Please do not hesitate to contact your friendly Harris Black team member for help with your tax planning.

The information in this blog is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute advice. While we attempt to ensure the information is current and accurate we do not guarantee its currency and accuracy. You should seek professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.

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