With tax return just around the corner (crazy, I know. Where did the year go?!) We thought it would be fitting to give our best tips to maximize your tax return this year or next!
If you’re someone who always watches all your friends take in large tax returns and you seem to get little to nothing, then this article is for you!
Although quickly approaching (June 30th), there’s still time!
1. Maximize depreciation deductions
Small businesses with an total annual turnover of less than $10 million can still receive an immediate tax deduction for nearly all individual assets purchased by 30 June 2018 that cost less than $20,000 that are used in your business.
If you are registered for GST, the amount is less the GST, but if you are not the total is taken to include the GST.
2. Claim deductions for a home office
If you’re constantly required to handle emails from home or have an agreement you’re completely entitled to claim a tax deduction for a percentage of this. Eg. The running of your cost and equipment.
3. Seek professional advice when starting a business
Professional expenses associated with starting a new business, such as legal and accounting fees, are deductible in the financial year those expenses are incurred rather than deductible over a five-year period as was the case previously.
If you established a business during the year, you should make sure you talk to us about claiming professional advice fees as an expense.
4. Consider whether your legal structure is right for your business
Small businesses are able to change their legal structure without incurring any income tax liability when active assets are transferred by one entity to another.
This rollover applies to active assets that are CGT assets, trading stock, revenue assets and depreciating assets used, or held ready for use, in the course of carrying on a business.
We can review your business structure to ensure it is appropriate for you and your business.
5. Review your private company loans
The income tax laws around loans made from private companies to directors and related parties are quite complex and if there are loans made from your private company you may need to review these prior to 30th June to make sure you are not at risk that these loans are considered unfranked dividends to shareholders or associates.
Depending on the circumstances, these strategies may include repaying a loan, declaring a dividend or entering a complying loan agreement.
In addition an unpaid distribution owed by a trust to a related private company beneficiary that arises on or after 1 July 2016 will be treated as a loan by the company, if the trustee and the company are controlled by the same family group. In these circumstances, the associated trust may be taken to have derived a deemed dividend for the amount of the unpaid trust distribution in 2017-18.
6. Write-off bad debts
If you have invoiced a client or customer and you are not going to receive payment for it you are able to claim a tax deduction for it in the year you decide to write off the debt. The invoice must previously been brought to account as income or sales.
7. Paying employee bonuses
If you pay your team bonuses and you want to bring expenses into the 2017-18 year, ensure they are quantified and documented in a properly authorized resolution (e.g. Board minute) prior to year-end to enable a deduction to be incurred for these bonuses where they are not paid or credited until the subsequent year.
8. Pay any outstanding superannuation entitlements
The Australian Government has announced a 12-month amnesty from 24 May 2018 for employers to pay any outstanding Superannuation Guarantee (SG) contributions for periods prior to 1 April 2018.
Employers who voluntarily disclose and pay previously undeclared SG shortfalls during the Amnesty and before an SG audit will not be liable for the administration penalties and will be able to claim a tax deduction for payments made during the 12-month period. The announcement is subject to approval by the Parliament. To able to claim the tax deduction in the 2017/18 Financial year these amounts must be paid by 30th June 2018.
Some specific tips for farmers:
7. Farm management deposits (FMDs)
One of the best tax-planning measures available to primary producers is effectively utilising the farm management deposits scheme, or FMDs. They are an effective business and cash flow planning tool.
Primary producers can deposit up to $800,000 in a FMD account, they can have early access to their FMD account during times of drought, and they may be able to offset the interest costs on primary production business debt.
Tax averaging enables primary producers to even out their income and tax payable over a maximum of five years to allow for good and bad years. This ensures that farmers don't pay more tax over time than taxpayers on comparable but steady incomes.
Primary producers who opted out of income tax averaging for 2006-07, or an earlier financial year, are able to choose to restart income tax averaging in 2017-18.
Hopefully these tips can assist you in getting the most from your tax return this year! Do not hesitate to contact The Wealth Genie for any financial advise and services!
- The Wealth Genie
Additional sources: https://thenewdaily.com.au/money/your-budget/2015/06/10/seven-tips-maximise-tax-return/?g
Michele Purvis is an advisor with over 30 years experience working in the accounting and financial services industry helping clients to define and create their wealth.