Tax planning is a legitimate discipline undertaken by companies. This is not a tax avoidance undertaking to deliberately exploit the tax system, but rather to minimise, within the legal limits, taxes paid.
Let’s look at some areas to consider this financial year:
The instant asset write-off threshold has been extended until 30 June 2018. This is a significant opportunity for small businesses to minimise their tax. To be eligible you must:
Either have an annual turnover of up to $10 million and the business asset must have cost up to $20,000, be in use and have been purchased between 1 July 2016 and 30 June 2018; Or have an annual turnover of up to $2 million and the business asset must have cost up to $20,000, be in use and have been purchased between 7:30pm on 12 May 2015 and 30 June 2016.
The ATO enables your business to deduct in this financial year any prepaid expenses incurred for work or services to be performed in the next financial year. There are prepayment rules that apply and it is important to consider these rules including ‘eligible service period’, ‘excluded expenditure’ such as amounts less than $1000 and salary and wages, ’12-month rule’ and ‘pre-RBT obligation’.
Recording debtors and creditors in an accrual accounting system – that is recording income and expenses when work or services are completed, whether or not payment has yet been received or paid – will enable your business to determine actual income and expenses for the financial year to 30 June.
Superannuation payments made to your employees by financial year end constitute a tax deduction for your business. It is essential that payments made to super funds are made timely and no later than 30 June 2018 to be eligible.
Appropriate distribution of superannuation payments is important and consideration must be given to its accuracy. Distribution will vary and will include to the individual choice of funds of employees, to contractors eligible to receive super contributions and to employees who opt for your company’s nominated (standard) fund.
Have your trust distributions been calculated to meet ATO legislation? Do you need your trust minutes prepared and signed prior to 30 June 2018? If so, we can help you and you can read more in the article titled ‘Trust Distribution for 2018’ in this newsletter.
Arrange a tax planning meeting with us and we will discuss ways you can optimise tax planning to benefit your business this year and every year hereafter.
How can YML help?
Talk to our Accountants today to see how YML Chartered Accountants can assist you with Tax Planning. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.