Tax Planning

Businesses

Trust Distributions

For the 2013 year rules apply which make it critical that your true resolution to distribute income is effective as at 30 June. Tax planning for Trusts will be critical in the 2013 year and should be conducted as soon as possible.

Bad Debts

Bad debts for the year must be written off prior to 30 June.  You should also prepare a minute documenting the write-off.  GST adjustments can be taken up for any GST charged on the original invoice.

Maximise Year-end Allowable Deductions

Expenses incurred before 30 June 2013 can reduce your taxable income.  Consideration should be given to upcoming liabilities and whether it is worthwhile incurring them before year-end:

• Paying director’s fees and bonuses
• Minor repairs on assets
• Scrapping assets
• Purchasing consumables required in the business

Superannuation Contributions

To be deductible, superannuation contributions must be paid and received by the relevant fund before 30 June irrespective of which tax quarter they apply to.  You should consider paying all superannuation liabilities for your staff before 30 June.  In addition, family business should consider maximising concessional contributions for key individuals.

Also note, all individuals have a concessional contributions cap of $25,000 for the year ending 30 June 2013.

Timing of Income

Consideration should be given to the timing of income near 30 June 2013 including:

• Timing of sales income
• Time of billing work in progress
• Date of entering into contracts for sales of CGT assets.

Trading Stock

A stocktake must be conducted before year end to identify any obsolete stock items and calculate an accurate year-end closing stock figure.

The methods of valuing stock are:

•  Cost
• Sales value
• Lower of market value or replacement cost.

Prepayments

Expenditure incurred for things to be done in a later income year is deductible over the service period, being the time the thing is to be done be under agreement.

For small business entities, an immediate deduction can be claimed under the 12-month rule for prepaid expenditure if the payment is incurred for a service period not exceeding 12 months and the service period ends in the next income year.

Certain prepayments required by law and amounts less than $1,000 are not subject to the prepayment rules and are deductible as incurred.

Shareholders Loans & Unpaid Present Entitlements

Any money that shareholders or their associates borrowed from a company can cause Division 7A to apply to you as a taxpayer.  Please consult your tax advisor.

Personal Use Assets

The use of company-owned assets outside of the business by shareholders or their associates can give rise to Division 7A issues and result in the payment of an unfranked dividend to the shareholder.  If you have company assets which are available for personal use please contact your tax advisor.

Depreciating assets & motor vehicles

Depreciation is calculated from the date of purchase (not year of purchase).  As a result business should consider delaying the acquisition of assets costing more than $6500 until after 30 June 2013.

Also note, from 1 July 2012 an accelerated depreciation deduction applies of $5,000 on top of the standard claim for motor vehicles in the year of acquisition.

PAYG Payment Summaries

Payment summaries for all employees must be provided to them by 15 July 2013 and lodged with the ATO by 14 August 2013 (unless you have an extension).

Individuals

Medical Expenses Rebate

The minimum threshold for the year has increased such that net medical expenses must exceed $2,120 to qualify for the 20% tax offset.

Maximising Year-End Allowable Deductions

Expenses that are incurred before 30 June 2013 can reduce taxable income.  Consideration should be given to upcoming liabilities and whether it is worthwhile incurring them before year-end.

Medicare levy surcharge

If you do not have private health insurance hospital cove, the thresholds for Medicare Levy Surcharge are:

• Singles (no dependants) - $84,000
• Families - $168,000 (plus $1500 for each dependent child after that)

Prepayments

A deduction may be available for certain prepaid expenditure (e.g. interest on investments) if made before 30 June 2013. 

Bonus Income

If you are in receipt of a bonus in the 2013 year it may be worthwhile considering salary sacrificing the bonus into superannuation to effectively manage your taxation.  You should consult your advisor if this is applicable to you. 

Superannuation:

         Income
         individuals aged over 60 will pay no tax on payments from their 
         superannuation

         

         Non-Concessional Contributions

A non-concessional contribution cap of $150,000 applies in the 2013.  The bring forward rule allowing a non-concessional contribution of $450,000 over a 3-year period can also be utilised depending on your circumstances.  It is important you contact your advisor if you are considering making substantial non-concessional contributions to ensure you will not breach the cap amounts.

Concessional Contributions

A personal deduction is available to certain taxpayers in the following amounts:

•  maximum concessional contribution is $25,000

There are a number of considerations to make to ensure you are able to claim a personal tax deduction for superannuation including:

Any earnings you make as an employee must be less than 10% of your combined assessable income, reportable fringe benefits and reportable superannuation contributions 

             

You must be under 75 years of age

Salary Sacrifice

Salary sacrifice can be an effective method of accessing lower tax rates as long as the benefits received are taxed at a lower rate than your salary under fringe benefits tax rules.  Please contact your advisor to discuss available strategies. 

Motor Vehicle Expenses

If you use your motor vehicle for business purposes it is worthwhile including this use as a deduction.

There are 4 methods of claiming a deduction as follows:

• The cents per km method
• The log book method (a log book should be kept for over 12 weeks)
• The one third actual costs method
• 12% or original value method

A log book should always be kept if making a substantial motor vehicle claim and is the most effective way of maximising your deduction when receipts and costs records are also maintained.