With the EOFY just days away it’s time to get your tax affairs in order. Here are our top 10 tax planning tips to get you started.
1. Small Business Assets
Now might be a great time to purchase a new computer or work car. The 2017 Federal budget gave small businesses (with a turnover less than $10 million) a 12-month extension (to 30 June 2018) to purchase and write-off any assets up to $20,000. But make sure you get advice on what’s excluded before you start spending. Remember, there’s no limit on the number of eligible assets costing less than $20,000 that you can immediately deduct.
2. Timing Your Income and Deductions
If you can, deferring your income until after June 30 can be a good way to reduce your EOFY tax bill. For example, you may legitimately defer income on cash receipts basis rather than on an accruals basis. You can also consider whether some expenses can be pre-paid, for example interest on an investment property (see Tricia’s article below) or insurance costs.
3. Be Charitable
Why not donate to a registered charity – you help someone in need and receive a legitimate tax deduction for yourself.
4. Bad Debts
It’s unfortunate, but sometimes getting paid can be a challenge. Where it looks like an invoice may go unpaid, you can write it off as a bad debt and claim a tax deduction. There are rules to follow about bad debts, so make sure you seek specialist tax advice first.
5. Superannuation Savings
If you’re self-employed you can claim a 100% tax deduction for any superannuation contributions you make. You may also be eligible for a small tax offset if you contribute super to your spouse. Employees may consider making a concessional superannuation contribution (see more information in Kate’s article below). Contributions must be received and cleared by the super fund before 30 June, or you can’t claim the deduction in this financial year – allow at least a few days to ensure the contribution is processed in time.
6. Lump Sum Payments
If you’ve just received a lump sum payment, you should consider whether that amount could be spread out over the future financial year – a tax expert can help you examine this and give you advice based on your unique circumstances.
7. High Income Earners and Health Insurance
If you’re a high-income earner purchasing private health insurance can help you avoid the Medicare Levy Surcharge. Although, to avoid the surcharge for the entire year your health insurance needs to be held for the entire year otherwise it will be prorated.
8. Staff Bonuses
You may be able to bring forward staff bonus provisions if the policies are approved before the end of the financial y ear and are made unconditional.
9. Trading Stock Valuations
Reviewing whether to use cost, market selling or replacement value of obsolete stock can bring forward deductions into the current financial year.
10. Invest in a Tax Adviser
If you have a share portfolio and investment properties it’s worth investing in a dedicated tax specialist to help you manage your tax return.
The only way to reduce your tax bill is to claim legitimate deductions. But if you’re not tracking your expenditure and keeping proper records, you may be missing out (there are a number of helpful cloud-based systems to keep track of your income, expenses and assets). On the other end of the spectrum is thinking you can claim everything – you can’t.
Getting your EOFY tax planning strategies right can go a long way to reducing the amount of tax you need to pay. If you need assistance please get in touch with us on (02) 9908 9888.