It’s that time of year again… Don’t let the 30th June creep up on you this year, and be prepared for tax time with our EOFY checklist and handy year-end tips. Lots of us miss out on opportunities because certain things must be done before the June 30th deadline, in order to receive specific tax advantages.
We’ve summarised some of the key items that you need to be on top of during tax time.
If an asset has been sold during the year (such as an investment property or business asset), you should consult with your accountant before June 30th to work out how much capital gain has been made and what can be done to reduce the tax impact on that gain.
This could include bringing forward other expenses or making more significant contributions to superannuation. For the sale of business assets, there may be very generous concessions available, so it’s best to consult a professional.
Super contributions are one of the areas that individuals need to review each year according to their circumstances. Tax deductions are now available to most taxpayers but can only be obtained in the year that the contribution to superannuation is made.
It may also be possible to contribute more than what an individual may have thought they were able to do. Tax agents have access to the exact amount that individuals can claim a tax deduction for but need to be met with long before June 30th so that they can thoroughly explore their options at tax time.
Instant asset write off
Most businesses can now claim a tax deduction for the total cost of items they buy for their business, and instant asset write-off policies have been expanded again as part of the Government’s COVID-19 initiative to encourage business spending.
There is now no limit to the amount a small business can write off under the instant asset write-off. This is known as “temporary full expensing” and is available for any asset purchased between 7.30 pm AEDT 6 October 2020 to 30 June 2022.
This also applies to second-hand assets (where your turnover is under $50 million). Purchasing later in the tax year (June) - as opposed to early in the new year (July) - gives a benefit sooner in the tax savings that are made on that purchase.
Small business checklist for EOFY 2021
• Pay quarterly super
Super Guarantee (SG) contributions must be paid by 30 June 2021 to qualify for a tax deduction in the 2020-21 financial year. The fund must receive these contributions by 30th June. Some clearing houses can take more than a week to submit the payment to the super fund. Always ensure that superannuation is paid before June 20th.
• Review capital expenditure
This financial year, the instant asset write-off allows eligible businesses to instantly deduct any amount spent on assets in their upcoming tax return. Remember only to buy items that are needed and not spend money on others to claim a tax deduction.
• Small business CGT concessions
Individuals operating a small business may be eligible for capital gains tax (CGT) concessions on the sale of business assets. The small business
CGT concessions are available to business taxpayers with an aggregated turnover of less than $2 million or on business assets less than $6 million. If a business you own has sold or you are thinking of selling, speak with us as soon as possible.
Obsolete, slow-moving or damaged stock should be identified by 30 June and disposed of for income purposes to receive a deduction. You should minimise the amount of stock on hand at year end.
• Contact the ATO
The ATO is responsive to businesses struggling to keep on top of their tax obligations due to COVID-19. Businesses struggling to meet their tax obligations should contact the ATO to discuss deferring payments, make variations to PAYG quarterly tax instalments, or change their GST reporting cycle from quarterly to monthly to receive quicker access to GST refunds.
• Defer income
Businesses may wish to delay tax payments on assessable income this financial year by deferring invoices until after 30 June. Income from the payments won’t be taxed until the following financial year.
• Family Trusts
Remember that family trusts must decide who is receiving the trust’s income and capital before June 30th. These days with digital signing, accountants must work through the family trust to ensure that they know how to distribute the income before June 30th.
• Bad Debts
Bad debts are a significant cost to all businesses that sell on credit. There is no sense in paying tax and GST on sales where payment will not be received, so reviewing any bad debts before the end of the year is important. The rules around claiming a tax deduction for bad debts are complicated, so speak with us if you believe you have debts that can be written off.
When in doubt… speak to the professionals
Tax time for small businesses comes with its own unique set of challenges, and finalising tax returns is an unwelcome hassle for most business owners. This is the perfect time of year to seek professional advice, and we are always here to support you.
Please feel free to contact our team firstname.lastname@example.org if you need some help with your end of year financials.