As the end of the financial year draws nearer, getting your tax in order is vital.
This year, some key Federal Budget measures may have a bearing on your tax outcomes.
CCIWA member Brentnalls WA recommends businesses follow a checklist of items to make tax time easier.
Prepay expenses before the end of the year
- If your business turns over less than $10 million per year, you can claim 100% deduction in the year an expense is paid.
Bring forward the purchase of plant and equipment
- Equipment you use and install by June 30, 2021 will be fully tax deductible in the current year.
- Your General Asset Pool can be deducted in full this year.
- You can choose whether your assets not held in your General Asset Pool can be fully deducted.
Utilise loss carry-back rules
- Assess whether this encourages further immediate asset write-offs.
- Review the impact on your franking account, and whether you have adequate franking credits to pay dividends.
- You may need to change shareholder remuneration from dividend to a deductible director expense.
Maximise your tax-deductible debt
- Loans for private purposes are not tax deductible.
- Review whether refinance options may be available to split your deductible vs non-deductible debt.
- Determine whether repayments on loans can be restructured, as the new rules limit the deductions available against vacant land.
Maximise superannuation contributions
- Super is only deductible if paid by June 30.
- Annual concessional contribution caps are $25,000.
- Assess whether you are eligible to utlise carry-forward of unused concessional contribution caps from prior years.
- Salary earners can make concessional member contributions, as the previous restriction (10 per cent rule) no longer applies.
Write off bad debts
- If debtors are not recoverable after all action has been taken, then write off the bad debt before June 30 to bring to account the expense.
- Ensure GST is adjusted.
Write off slow-moving or obsolete stock
- Review your stock holding.
- If the market value is lower than the cost of the stock, you can obtain a deduction for the difference.
Utilise unrealised capital losses
- Ensure you take advantage of capital losses within your group.
- Look at preparing distribution minutes in a way to utlise group losses.
Check depreciation rates on plants and equipment
- Review depreciation schedules for any scrapped plant and equipment that can be written off.
- Review the effective lives of equipment and consider whether you can increase the rate of depreciation.
Repayment of Division 7A loans
- Cash repayments can reduce the requirements to declare dividends.
Plan for the change in company tax rates
- Base rate companies pay tax 26 per cent while all others pay tax at 30 per cent.
- Planning for rate change in FY 2022 to 25 per cent – consider the impact of timing on dividends and the tax credit vs top-up tax payable.
- Review any planning that could help achieve the desired tax rate.
Check your access to refundable franking credits
- Look for opportunities ahead of June 30, 2021 to access any refundable franking credits.
- Consider whether any loss entities could result in a flow of highly franked income resulting in a refund.
Claim eligible research and development activities
- When engaged in research and development activities, clearly document the activities and costs relating to those activities to take advantage of R&D Tax Offsets.
Plan for your tax position before June 30
- Understand your options to reduce or defer tax payments.
- Plan your cashflow for tax instalments, and the tax due on tax return lodgements.
- Identify opportunities to vary tax instalments and improve cashflow.
- Implement the tax planning measures listed above, as well as other savings.
It is advised to see an accountant to help with business tax matters.