End of financial year tips
With the end of the Financial Year just around the corner it’s always good to remind yourself of some hints going into the end of the Financial Year:
Ensure your Superannuation Guarantee is paid before the 30th June. Did you know that unless your last quarter Superannuation is actually paid before the end of the Financial Year you cannot claim it as a tax deduction in this Financial Year? And that unless it is paid by the due date (28th July) it is not even claimable in the next financial year?
Bring forward spending (cash permitting) – if there are things you need in your business (consumables not equipment such as magazine subscriptions, stationery etc) that you would have to buy in July or August we suggest purchasing these in June so you can claim the deduction this financial year. You can even prepay business expenses, like rent, utilities, internet, insurance, travel and subscriptions up to a year in advance and claim a tax deduction on them. Be careful here. There is no need to go out and spend money to get a tax deduction on things that you don’t need. After all that is just a waste of money!
Buy some assets. Under the instant tax write concession for small businesses introduced last year, you can get an immediate deduction for assets less than $20,000.
Cleanup assets. If you have assets on your register that you no longer use let us know so we can take care of it at tax time so we can write them off for 30 June. Sale of Assets – make sure you get your timing right. If you are going to make a capital gain on the sale of an asset and you don’t have any carried forward losses it may be wise to defer this sale until next financial year.
Write off Bad Debts. In order to claim a deduction for a bad debt you must ensure this amount is written off prior to the end of the Financial Year. Writing off a bad debt means that you are losing out on that exact amount of money from your bottom line profit. Instead of just writing debts off we suggest reviewing your Accounts Receivable and ensuring you have exhausted all avenues of collection before writing this debt off.
Defer Income. Be smart with your invoicing. Billing large amounts on the 30th June will sure make your figures look good but if you are on an accruals for accounting you will need to pay tax on that billing this Financial Year. Look to defer until 1st July or later if possible.
Directors Fees/Bonuses. If you are looking to pay a Bonus to your staff or Directors Fees to yourself if your business is structured through a Company you need to ensure the commitment to pay these is made prior to the 30th June. The good news with Directors Fees is that the business can claim a deduction this Financial Year and if you don’t actually pay the fees to yourself until next Financial Year you won’t need to declare the amounts in your personal tax return until next year when they are actually paid.
Dividends. If you want to pay Fully Franked Dividends to yourselves it is important to ensure you have paid enough tax in the Company to match the level of dividend you want to pay.
Review your position. Timing can be the most important thing when looking at an overall tax strategy. You may have a lower taxable income therefore tax rate this year and know that you will have a much higher tax rate next year. If this is the case you may want to bring forward income and defer making additional super contributions etc until next Financial Year when your tax rate will be higher.
If you need some specific tax advice coming up to end of Financial Year, please book a meeting with Michael to discuss your particular circumstances.