END OF TAX TIPS
Nothing much changes from year to year unless the Treasurer sweetens his May Budget for small business. This year, nothing much at all!
WARNING
A common misconception is that the Budget announced that you can get an immediate $5000 deduction for a new business motor vehicle and you’ll be able to immediately write off equipment costing up to $5000.
WRONG! WRONG! WRONG! WRONG!
Please be warned that these concessions will only apply to purchases made AFTER July 1, 2012.
Now for the tips for business
If your business is selling product, have an end of financial year sale. The trading stock remaining on your shelf is counted towards your assessable profit.
If you charge fees for your services, don’t send out invoices in June. This strategy applies equally whether you use accruals or cash accounting methods.
If you retail or wholesale product and usually send credit customers a monthly statement, don’t send a statement in June. This strategy applies equally whether you use accruals or cash accounting methods.
If you use the cash accounting method, draw cheques to your suppliers before June 30. These cheques will be reconciled to your bank statement as having been paid in June despite not being sent until July. (This is one advantage using cheques rather than or as well as using Bpay offers small business).
If you are a retailer or wholesaler order trading stock in June for delivery in July. If you use the cash method pay before June 30 (or draw your cheque); if you use the accruals accounting method, the invoices you receive will be counted as expenses this year, not next. But remember not to take delivery until July otherwise the stock will form part of the stock take.
Pre-pay leases, rent, interest, insurance and other regular expenses 13 months ahead. In other words make payment for June 2011 and the next 12 months in one hit. If you can’t pay 13 months, pay 2, 3, 4, 5 or whatever your cash flow allows.
Superannuation. If you’re under 49, the maximum allowable contribution is $25,000. If you’re 50 or over, the maximum is $50,000. Be bloody careful – these limits apply to ALL super contributions made on your behalf and there are harsh penalties if too much is contributed!
Another warning…..the Budget announced a bit of relief for people who inadvertently contribute too much. This concession applies from 1 July 2011, not this financial year!!
In years like this when business is facing tough economic conditions, it’s common for people to say there is no need for end of year tax planning because profits are down.
This is not very clever thinking. One of the best pieces of advice I can give you when it comes to tax planning is this: Why pay today what you can defer until tomorrow?
Tax for 2012 financial year is not due for payment for a lot of you until May 2013. If you can lock in low taxes for 2010-11 due in May 2012 and have a good year in 2011-12 then keeping those tax liabilities low will enhance your cash flow position for the next 2 years from about now! If by good tax-planning now, you can lock in a loss to be carried forward, then all the better for those coming 2 years!
General tips for taxpayers
Really there’s not much individual taxpayers can do unless they are:-
Subcontractors
Believe it or not, you subbies are in business. What I said above for end of year tax planning for business goes equally for you!
Share Investors
If you have a share portfolio, have a look for some crook performers, then sell them off in June. This will lock in a capital loss.
If you sold shares or any other assets at a capital gain during the year, the loss will help reduce your CGT. If not, you will be able to carry the capital loss forward to use to reduce taxable capital gain in future years.
To take this line of thinking further, if you are really keen to own the shares why not consider selling them at the end of June and buying them back in July. You will have locked in the useable capital loss! And using online brokers is as cheap as!
If you are the trustee of a self-managed super fund, consider selling underperforming shares you own personally into the superfund. You will lock in a capital loss for yourself and will have them held in a concessionally taxed environment if they come good in the future.
Property Investors
Bring forward your deductible expenses where possible – repairs, insurance, commissions, rates, interest can be paid 13 months in advance.
Make sure if your house is less than 40 years old to get a Quantity Surveyor to report on what it cost to build your place. Two percent of that cost can be written off (depreciated) every year – and that can be substantial! (You will need a Quantity Surveyor unless you can show receipts to show exactly what your property cost.)
WARNING…..Be careful not to confuse “repairs & maintenance” with “improvements”. The former is an expense; the latter is a capital item and must be depreciated.
Cheers
Bob Lamont
Director Principal
Corporate Accountants
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