30 June 2018 Tax Tips
With 30 June just around the corner we highlight below the main points worth considering this tax time. However, it is worth noting that we would always recommend sitting with your tax adviser who would be best position to advise on a tax strategy for you and your business.
We also list the key changes for individuals and businesses.
Business Has Taxable Profits
If the business is forecast to earn taxable profits, consideration should be given to the following:
- Are there brought forward tax losses?
- Is it worth considering paying additional salaries to the directors/owners (review in conjunction with personal tax position)?
- Receive additional tax deductions by salary sacrificing super. NB: super contributions limited to $25,000 and must be physically received by the super fund before 30 June. Furthermore, this
- option should be considered in conjunction with current cash balance and future working capital requirements
- Can the business prepaying expenses e.g. rent, insurance
- Delay sending out sales invoices until 1 July (timing benefit only)
- SMBs can receive an immediate asset write-off for asset purchases less than $20,000. Again, this option should only be considered in conjunction with working capital requirements.
- Are there any specific debts that should be written off as unrecoverable?
- Ensure super liabilities are paid and received by the employee’s fund before 30 June
Business Has Taxable Losses
Even if the business is expected to make tax losses, there are steps you can take to reduce your overall tax liability, namely:
- Reduce salaries paid to directors/shareholders, thereby reducing the tax losses in the business, whilst minimising tax paid by the individual
- Forward date sales invoices to 30 June (where possible)
- Push back expenses to 1 July (where possible)
Other matters worth bearing in mind include:
- Future plans for the business, including forecast performance for current and future years
- Directors loans, particularly any falling under Div7A rules
- Franking account balance and whether worth declaring dividends
- Current cash balance and forecast working capital requirements.
We would always recommend that you discuss your specific situation with your tax agent who would be best qualified to advise on the best strategy for you.
Key Tax Changes This Financial Year
- Rental travel deductions – from 1 July 2017, taxpayers are no longer able to claim any deductions for the cost of travel they incur relating to a residential rental property. They may only claim travel deductions if they are carrying on a business of property investing or are an excluded entity. Click here for more info.
- Limiting depreciation deductions on plant and equipment – from 1 July 2017, taxpayers cannot claim depreciation of second-hand plant and equipment in rental properties used for residential accommodation. These changes apply to second-hand plant and equipment acquired at or after 7.30pm on 9 May 2017 unless acquired under a contract entered into before this time. Additionally, taxpayers cannot claim plant and equipment installed on or after 1 July 2017 if they have used it for a private purpose.
- Temporary budget repair levy – the temporary budget repair levy of 2% has finished and no longer applies for 2017–18
- Tax deductions for personal superannuation contributions – eligibility rules for claiming a deduction for personal superannuation contributions have changed. Previously, only those taxpayers who were primarily self-employed could claim this deduction. From 1 July 2017, most taxpayers under 75 years old (including those aged 65 to 74 who meet the work test) are able to claim a deduction for personal super contributions regardless of their employment arrangement.
- Corporate tax rate – from 1 July 2017, companies that are base rate entities will apply the 27.5% corporate tax rate. A company is a base rate entity for 2017–18 if it:
– has an aggregated turnover of less than $25 million
– is carrying on a business.
- Maximum franking credits – the maximum franking credit that can be allocated to a frankable distribution is based on a company’s applicable corporate tax rate for imputation purposes. For the 2017–18, a company’s corporate tax rate for imputation purposes may be either 27.5% or 30%, depending on the company’s circumstances.
- Expanding accelerated depreciation for small businesses – small businesses can continue to claim an immediate deduction for assets they first acquire and start to use, or have installed ready for use, up until 30 June 2018, if each depreciable asset costs less than $20,000. The balance of the general small business pool is also immediately deductible if the balance is less than $20,000 at the end of an income year that ends on or after 12 May 2015 and on or before 30 June 2018 (including an existing general small business pool).
Should you have any questions, please don’t hesitate to contact us.