EOFY tax planning checklist

By Beatrice Thomas

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.

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