Business Tax Planning Strategies 2017
The End of Financial Year 2017 is fast approaching and 30 June 2017 is a key date. Please review the list of business tax planning strategies outlined in this article and if you would like to discuss your individual circumstances and how we may be able to assist you further, please give us a call on 02 9948 5521.
Small Business Concessions
Taxpayers can make prepayments (up to 12 months) on expenses (e.g. Loan Interest, Rent, subscriptions) before 30 June 2017 and obtain a full tax deduction in the 2017 financial year.
The tax rate for small companies (aggregated annual turnover of less than $10m) will be 27.5% from the 2016/17 income year. The tax rate for small companies (aggregated annual turnover of less than $25m) will be 27.5% from the 2017/18 income year. The tax rates for small companies will gradually drop to 25% from 2026-27; the aggregated annual turnover for a company to be defined as a small company will also increase to $50m from 2018-19.
The threshold below which small businesses can claim an immediate deduction for the cost of assets will be $20,000 from 7pm 12 May 2015 to end of June 2018. Other assets (above $20,000) will be added to the general small business pool and depreciated at 15% in the first year and 30% thereafter.
Tools of Trade / FBT Exempt Items
The purchase of Tools of Trade and other FBT exempt items for business owners and employees can be an effective way to buy equipment with a tax benefit. Items that can be packaged include Handheld/Portable Tools of Trade, Computer Software, Notebook Computers, Personal Electronic Organisers, Digital Cameras, Briefcases, Protective Clothing, and Mobile Phones.
If structured correctly, the Employer will be entitled to a full tax deduction for the reimbursement payment to the employee (for the equipment cost), and the employee’s salary package will only be reduced by the GST-exclusive cost of the items purchased. You should buy these items before 30 June 2017.
Where practical, defer issuing further invoices and/or receiving cash/debtor payments until after 30 June 2017. Please note that ATO will generally require you to pay tax on income that you have either received or become entitled to due to the completion of work.
Bring Forward Expenses
Purchase consumable items before 30 June 2017. These include stationery, printing, office and computer supplies. Make payments for repairs and maintenance (business, rental property, employment) before 30 June 2017.
Maximise your deductions
Review of debtors and writing off any that are not recoverable, review inventory and assets schedules for disposal, obsolete items and broken item. Pay professional fees or other employment or business-related deductions prior to 30 June 2017.
Employee Superannuation Payments
To claim a tax deduction in the 2017 financial year, you need to ensure that your employee superannuation payments have reached the employee’s super fund bank account by 30 June 2017.
As most clearing houses may take up to five business days to pass on funds to the employee’s superfund we strongly advise that you make your super payment no later than 6:00pm (AEST) Friday 23rd June 2017.
For any last – minute superannuation payments, we recommend that you arrange for a bank cheque made payable to your employee super fund prior to 30 June 2017.
Concessional Superannuation Cap
Make superannuation contributions, if you are under contributions limits and eligible to claim a deduction. The concessional superannuation cap for 2017 is $30,000 for persons of any age, 48 and under & $35,000 age 49 to 74. Do not go over this limit as you will pay more tax. Note that employer super guarantee contributions are included in these caps. Where a contribution is made, that exceeds these limits, the excess is taxed to the fund member’s account at an effective rate of 47-49%. In order to claim a tax deduction in the 2017 financial year, the super fund must receive the contribution by 30 June 2017.
Motor Vehicle Log Book
Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2017. You should make a record of your odometer reading as at 30 June 2017, and keep all receipts/invoices for motor vehicle expenses. The same log book can be used for 5 years.
Defer Investment Income & Capital Gains
If practical, arrange for the receipt of Investment Income (e.g. interest on Term Deposits) and the Contract Date for the sale of Capital Gains assets, to occur after 30 June 2017.
Capital Gains are determined by the date on which a contract is entered into. If you are considering selling shares, business, or property, you may wish to delay signing the contract until the new financial year (depending upon your level of taxable income in the year to 30 June 2017 and projected taxable income for the next year).
Investment Property Depreciation
If you own a rental property and haven’t already done so, arrange for the preparation of a Property Depreciation Report to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property.
Changes related to investment properties to be introduced on of 1 July 2017
From 1 July 2017, the Government will disallow deductions for travel expenses relating to inspecting, maintaining, or collecting rent for a residential rental property.
From 1 July 2017, the Government will also limit ‘plant and equipment’ depreciation deductions to outlays actually incurred by investors in residential real estate properties.
Private Company (“Division 7A”) Loans
Business owners who have borrowed funds from their company in previous years must ensure that the appropriate principal and interest repayments are made by 30 June 2017. New (current year) loans must either be paid back to the company or have a Division 7A loan agreement entered into before the lodgement date or risk having it counted as an unfranked dividend in the return of the individual.
Year End Stock Take / Work in Progress
If applicable, you need to prepare a detailed Stock Take and/or Work in Progress listing as at 30 June 2017. Review your listing and write-off any obsolete or worthless stock items.
New rules applying soon for selling property
Don’t forget that new rules will soon apply to sales of taxable Australian real property with a market value of $2 million or more. A 10% non-final withholding tax will be incurred for all contracts entered into on or after 1 July 2016, unless a clearance certificate or variation certificate is obtained.
If you are selling real property with a market value of $2 million or more and are:
- An Australian resident vendor, you can avoid the 10% withholding by providing a clearance certificate to the purchaser prior to settlement
- A foreign resident vendor, you may apply for a variation of the withholding.
You may claim a credit for the withholding amount paid to the ATO against the final tax assessed in the vendor’s income tax return.
Purchasers must pay the amount withheld at settlement to the ATO.
On 01 July 2017, the threshold will change to real properties with a market value of $750,000
Ensure that Trustee Resolutions distributing income are prepared and signed before 30 June 2017 for Family (Discretionary) Trusts.
May 2017 Budget: Tax items
- The first home super savers scheme: Voluntary contributions can be made into super up to $15,000 per year, with a maximum withdrawal of $30,000 plus deemed earnings. These can be salary sacrificed or claimed as a tax deduction in your tax return (concessional before tax contributions). The contributions into the fund are taxed at 15% and withdrawals your marginal rate with a tax rebate of 30% received upon withdrawal. For a person on $60,000, around $6,240 more can be saved for a deposit than using a standard savings account.
- From 1 July 2018 over 65’s will be able to sell their family home and make a non- concessional (not taxed in the superfund) contribution of $300,000 each from the proceeds
- From 1 July 2017, you can no longer claim for travelling to inspect/maintain rental properties.
- From 1 July 2017, the taxable payments reporting system is extended to include cleaning and courier industries (expanded from just the building industry). Payment to these contractors must be included in the taxable payments annual report (due 28 August).
If you would like further information or to discuss any of these items please give us a call on 02 9948 5521.
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