As this tax year draws to a close, there are strategies or matters you can action prior to 30 June 2018 to minimise or defer some of your tax burdens. Undertaking some year-end tax planning can save you from any “surprise” tax bills in the future.
Please read on for some strategies you may be able to utilise to successfully end your 2018 tax year. We have also put together some key record-keeping and accounting action items to satisfy ATO requirements.
Be mindful of the ATO “hit list” for the 2018 tax returns and in particular the areas we have highlighted below.
Tax Tips & Strategies
• Ensure your accounting records and bookkeeping are all up to date as of 30 June 2018. Ensure you have documentation (eg. receipts) to support each transaction.
• We recommend that forecasts of your future tax bills are prepared so that you do not get any “surprises” when you lodge your 2018 tax return. Particularly if your business is growing or if you have started a new business. Contact us for help.
• Accelerate legitimate deductions and defer the receipt of income (hold off invoicing where possible until after 30 June 2018).
• Small businesses can claim an upfront deduction for prepaid expenses (in certain circumstances) instead of spreading it over multiple tax years. Consider prepaying business expenses that relate to a 12 month period or less on or by 30 June 2018.
• If you have received any income in advance (where the good or service has not been provided yet), this may not be assessable in your 2018 tax return. You may be able to defer the taxing of the income to the next tax year.
• Small business owners can write off and claim a full deduction for any depreciable assets costing less than $20,000 that are purchased and installed ready for use on or before 30 June 2018. The May 2018 Federal Budget proposed to extend this concession to 30 June 2019, however, this has not yet been legislated.
• Write off any bad debts. To claim a deduction for bad debts, the debtor must have been “written off” in your accounting ledger on or before 30 June 2018. Good business practice is to review this regularly and not just at year-end.
• To claim a deduction for employee superannuation, this must be paid before 30 June 2018.
• To claim a deduction for employee bonuses, the bonuses must be committed to or communicated to the employees on or before 30 June 2018.
• Conduct a year-end stocktake and review stock on hand to determine if any stock needs to be scrapped or written off by 30 June 2018.
• Review your payroll records and perform year-end reconciliations. Be prepared to issue PAYG Payment Summaries to employees by the ATO due dates.
• Donations to Deductible Gift Recipients should be made on or before 30 June 2018 to claim a tax deduction in your 2018 tax return.
• Ensure the minimum Division 7A loan repayments are made by 30 June 2018 and place any applicable Division 7A loans under loan agreements.
• Reconcile petty cash/float balances to the accounting records.
• Ensure your motor vehicle logbook is current and up to date. If you do not have a current logbook, you will need to start a new logbook for 12 weeks. This will last you for 5 years.
• Declare and pay any company dividends to shareholders by 30 June 2018. Minutes and dividend statements should be prepared and issued.
• Trustees are required to determine the distribution of income to beneficiaries on or by 30 June 2018 in writing (the relevant date is dependent on the trust deed).
• Unpaid present entitlements (UPE) in trusts should be reviewed and any action required taken by 30 June 2018.
• Consider if you require any private health (hospital) insurance particularly if you are close to or over the Medicare Levy Surcharge income thresholds (Singles: $90,000 threshold, Family: $180,000 threshold). Hospital insurance needs to be taken out from 1 July to avoid the Medicare Levy Surcharge for the full year.
ATO “Hit List”
• Overclaiming work-related deductions including laundry, home office expenses, motor vehicle deductions. Ensure you have records to substantiate deductions claimed.
• Rental property (holiday home) deductions.
• Bitcoin investors – checking that capital gains tax is paid and declared.
• Uber drivers, Airbnb, Airtasker – the ATO is aware that some engaging in the sharing economy are not declaring their income properly.
• Cash businesses and undeclared business income.
Please contact us to find out strategies that are suitable for you to achieve a smooth and successful 30 June 2018 year-end.
Please note that this information is not specific and is general in nature and cannot be relied on as advice. Please contact us for advice specific to you and your circumstances.