With 30 June 2015 just around the corner, businesses should be finalising their tax planning to ensure that they achieve the best possible outcomes.
The following are some last minute things that you can do to improve your businesses 2015 tax position.
Pay Superannuation Contributions
Whilst employer superannuation contributions for the quarter ending 30 June 2015 are not due until 28 July, businesses should consider paying those contributions prior to EOFY.
As superannuation contributions are deductible in the year in which they are paid, paying prior to EOFY will bring forward the deduction from 2016 to 2015.
If your business operates through a discretionary (family) trust, it is necessary to decide how the trust’s income is to be distributed (and therefore taxed) on or before 30 June.
Failure to pass a distribution resolution by EOFY could give rise to unintended tax consequences. As such, document your distribution resolutions if you have not already done so.
With the small business asset write-off now law, businesses with turnover of less than $2m can claim an immediate deduction for assets costing up to $20,000 in 2015. As such, consider whether to acquire any new assets prior to EOFY.
Unfortunately, businesses with turnover of $2m or more cannot make use of the write-off. However, those businesses should review their asset register and scrap assets where appropriate.
Businesses with turnover of less than $2m can claim an immediate deduction for prepayments that meet the 12 month rule. Business with turnover of $2m or more can claim an immediate deduction for prepayments of up to $1,000.
As such, consider if the prepayment rules can be used to bring forward tax deductions into 2015.
Bad debts are deductible in the year in which they are written off. Given this, businesses should review their accounts receivable prior to EOFY and write-off any unrecoverable debts.
Businesses with trading stock (inventory) should undertake a stocktake at 30 June each year.
As part of the stocktake, those businesses should identify any stock items that should be scrapped/written off.
Also, whilst most businesses value trading stock using the “cost method”, there are two alternative methods that may result in better tax outcomes. Talk to us about whether using an alternative method is right for your business.
Income in Advance
Review invoices that include products and/or services to be provided after 30 June 2015. Where this is the case, those invoices may not be taxable until the 2016 year. If this is relevant to your business, talk to us about how the Arthur Murray principal may apply to improve your 2015 tax position.
Income & Expenses
Businesses should look at what expenses can be brought forward into 2015 and what income can be deferred to 2016. Not only will this help the 2015 position, but small companies with turnover of less than $2m will be able to take full advantage of the transition to the 28.5% company tax rate that comes in on 1 July 2015.
Will your business be paying bonuses in relation to the financial year ending 30 June 2015? If so, consider quantifying the amount of the bonus and locking in the commitment to pay prior to EOFY in order to bring the deduction forward into the 2015 year.
If you are looking at providing for bonuses, talk to us about the specific requirements to be met.
Planning to make charitable donations? If so, why not make those donations prior to EOFY to get the deduction in 2015? But remember, the donation must be made to a Deductible Gift Recipient.