We are nearing the end of financial year again. Here are some things to consider to reduce the tax bill or defer some of it to next year:
- Immediate deduction for assets – due to COVID19, the government has temporarily increased the instant asset write off to $150,000, to 30 June 2020. This also includes second hand assets. Click here to read more.
There are a small number of assets that are excluded. Click here to read more. If you purchase a car (a passenger vehicle, except a motor cycle or similar vehicle, designed to carry a load less than one tonne and fewer than nine passengers) for your business, the instant asset write-off is limited to the business portion of the car limit of $57,581 for the 2019–20 income tax year. For example, if you use your vehicle for 75% business use, the total you can claim under the instant asset write-off is 75% of $57,581, which equals $43,186.
- Paying employee superannuation. If you pay your June quarter liability before 30 June, then you are allowed the deduction for that financial year.
- Defer income. If your business allows, consider deferring some invoicing until July.
- Prepayments. If cashflow allows, consider paying things in advance up to 12 months, including rent, subscriptions, insurance.
- Bring forward expenses. Consider bringing forward some July expenses one month forward. If you have a credit card with an interest free period, you can purchase items in June and pay for them in July.
- Write-off bad debts. Go through your aged receivables and consider writing off any old debts that are unrecoverable. This will ensure that these invoices will not be added to your taxable income. Also consider debt collection for these debts, as cash in your business is better than writing it off.
Other things to consider before 30 June:
- Review your directors loan transactions during the year. Repay the funds you borrowed from the company by 30 June.
- Ensure any employee contributions for private expenses are reimbursed to the company, declared as wages, or declared as dividends. Eg Private usage of car.
- If any dividends are paid, ensure that minutes are recorded and dividend statements are prepared.
- Ensure that trust distribution minutes are recorded before 30 June.
- Ensure and FBT return is prepared & lodged for any fringe benefits you may have (eg car, entertainment, parking, company paid personal transactions).
- Stocktake – if you hold inventory, please complete a stocktake at 30 June.
If you have any questions or concerns regarding these, please contact us.
