With EOFY 2017 just around the corner businesses and individuals will be starting to think about all things tax.
The following is a list of items to consider to help you achieve the best possible tax outcomes.
Superannuation contributions
There is just enough time left to maximise contributions before the contribution limit reduces to $25,000 on 1 July. Likewise for those wanting to top up their super balance with non-concessional(personal non-deductible) contributions.
Salary sacrifice arrangements should also be updated to take account of the reduced contribution limit moving forwards. It is an ideal time to consider other salary packaging options – particularly if you work for a not-for-profit that has access to the FBT exemption or rebate.
As contributions are only deductible when paid, businesses should ensure that they are paid prior to 30 June in order to secure the deduction in the 2017 financial year.
Payment summaries
Employers are reminded of the need to distribute Payment Summaries to employees by 14 July.
Once payment summaries are issued, employees can prepare their 2017 tax returns. On this front, the ATO have advised that they will start processing 2017 tax returns from 7 July with the first refunds to issue from 18 July.
As always, our checklists are on our website to assist you in preparing to lodge your tax return.
Small Business Entities
The SBE turnover threshold has recently been raised from $2M to $10M. This means that more businesses can access the generous SBE concessions for the 2017 financial year.
For example, SBEs should look to make use of the $20,000 instant asset write-off and the ability to claim an outright deduction for prepaid expenses.
Stocktake time
Businesses that carry stock need to complete a stocktake at EOFY to ensure that they can meet their tax compliance obligations. Businesses should also consider the different valuation methods to ensure that they obtain the best tax outcomes.
At Sky Accountants we encourage businesses, particularly those in the hospitality industry, to complete regular stocktakes. Without a regular stock-take you don’t know if you have too much cash tied up in stock and you don’t know whether the business is achieving adequate margins.
Bad debts
According to the ATOs long standing guidance, bad debts can only be claimed as a deduction in the year that the debt is written off. As such, businesses need to review their accounts receivable and write off any bad debts they want to claim prior to 30 June.
Unearned income
Has your business invoiced or received payment for income before it has been earned? Eg where services and/or products are still to be delivered.
If so, the Arthur Murray Principle may apply to defer tax on that income.
Businesses should identify any unearned income at EOFY and discuss the taxation treatment of that income with their accountant.
Paying bonuses?
Do you plan to pay bonuses to employees in respect to the 2017 financial year? If so, where a commitment to pay the bonuses is made prior to EOFY, the bonuses may be claimed as a deduction in 2017. This is the case notwithstanding that they will be paid after EOFY.
Businesses wanting to claim a deduction for bonuses should seek advice to ensure that all necessary requirements are met.
Planning to support a charity?
Donations to Deductible Gift Recipients (DGRs) of $2 or more can be claimed as a tax deductionwhen paid.
If you are planning to support a charity this year, EOFY is the perfect time to make your donation.
Prepayment of investment expenses
Investors can claim a deduction for prepaid expenses, subject to the 12 month rule. Eg prepaying interest on an investment property or margin lending loan.
Investors looking for extra tax deductions in 2017 should talk to their accountant about prepaying expenses.
Private Health Insurance
Persons/families with income in excess of the relevant threshold will be required to pay an additional Medicare Levy Surcharge unless covered by private health insurance.
If your income will exceed the threshold and you don’t have private health cover, you should investigate options to avoid the surcharge next financial year.
Trust distributions
Do you have a trust? If so, you need to pass a resolution to determine who the trust income will be distributed to and therefore how it will be taxed.
Not sure what to do? Contact us for assistance.
Research & Development
Has your business undertaken any R&D during the 2017 year? If so, now is the time to ensure that your activities are eligible and that your record keeping is in order so that you can submit your application promptly.
If you are not sure whether your R&D activities qualify, now is the time to seek an Advance Finding.
Likewise, if any of your R&D was undertaken offshore you will require an Overseas Finding. It is important to note that Overseas Finding applications need to be submitted prior to 30 June in the year in which the overseas R&D activities commenced.
As such, businesses who need an Overseas Finding need to move quickly.
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