With the Federal Election over and the upcoming end of the 2019 tax year, here are some top tips and key strategies that may put you in a better tax position. Taking the time to do some tax planning may result in a better outcome in your 2019 tax return and start the new tax year on the front foot.
We also bring to your attention the ATO’s targets for this upcoming tax year.
Tax Tips
• Ensure your accounting records and bookkeeping are all up to date as of 30 June 2019.
• 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 2019 tax return. Particularly if your business is growing or if you have started a new business.
• Accelerate legitimate deductions and defer the receipt of income (hold off invoicing where possible until after 30 June 2019).
• 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 2019.
• If you have received any income in advance (where the good or service has not been provided yet), you may be able to defer the taxing of the income to the 2020 tax year (instead of the 2019 tax year).
• Businesses with less than $50 million annual turnovers can write off and claim a full deduction for any depreciable assets costing less than $30,000 that are purchased and installed ready for use between 2 April 2019 to 30 June 2019.
• 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 2019. 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 2019.
• To claim a deduction for employee bonuses, the bonuses must be committed to or communicated to the employees on or before 30 June 2019.
• 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 2019.
• Review your payroll records and perform year-end reconciliations. Be prepared to issue PAYG Payment Summaries to employees by the ATO due dates. If you are already using Single Touch Payroll, you may not need to do this.
• Donations to Deductible Gift Recipients should be made on or before 30 June 2019 to claim a tax deduction in your 2019 tax return.
• Ensure the minimum Division 7A loan repayments are made by 30 June 2019 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 2019. 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 2019 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 2019.
• 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.
• If you wish to claim work-related deductions such as telephone or internet expenses, make sure you have records to substantiate your work-related usage. For example, you can maintain a 4-week diary of your private and work-related usage.
• You may be able to make concessional superannuation contributions that can be claimed as a deduction in your tax return. These are subject to requirements and annual limits. You should seek financial advice.
ATO “Hit List”
• Cash businesses and undeclared business income. This is an area that the ATO will continue to focus on and have received additional funding to tackle the black economy.
• Overclaiming work-related deductions. Ensure you have records to substantiate deductions claimed. The ATO now requires itemised details of the deductions you are claiming in your 2019 tax returns. This will make it easier for the ATO to see what you are claiming and to select taxpayers to audit.
• Clothing, dry cleaning, and laundry deductions.
• Home office deductions (particularly rent, rates, and mortgage interest).
• Overtime meal claims.
• Union fees and subscriptions.
• Mobile phone and internet deductions.
• Motor vehicle deductions.
• Rental property deductions such as holiday homes, upfront repairs, and renovations, incorrect mortgage interest claims.
• Bitcoin investors – checking that it is declared in your tax return.
• Earnings from the “gig economy” are declared in your tax return such as Uber drivers, Airbnb, Airtasker.
• Property and construction.
• Taxpayers with a history of non-lodgement of income tax returns and business activity statements.
Please contact us to find out more about how your business could benefit from this measure.
Please note 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.