The end of the financial year is just a few days away so it won't hurt to review some of the opportunities to save tax before 30 June, and to be ready for the next year.

1. $20,000 asset write-off

All asset purchases up to $20,000 per item (excl. GST), acquired after 12 May 2015 and up to 30 June 2017, can be immediately written off.   Attractive as it sounds, remember, your benefit is only at the marginal tax rate; for example, if your taxable income is $80,000, and you spend $20,000 on a piece of equipment, your tax benefit is $6,900 (20,000 x 34.5%).

2. Deductions

You can bring forward deductions by prepaying repairs, rent, employee super, and consumables.   Car expenses can be claimed as long as you keep a log book for 3 months once every five years, and you also need to record its odometer reading on 30 June each year.

3. Superannuation

Concessional deductions are $30,000 for those under 49 on 1 July 2014, and $35,000 for those over.   A good tax strategy is to use an SMSF and transfer surplus wealth into the fund, not only for concessionals but also non-concessional contributions, now up to $180,000 a year.   Income is taxed in super at 15%, so there is a big saving on marginal tax rates.

4. Lower tax rates

Can you defer income until next year?   From 1 July, the company tax rate reduces to 28.5% and for unincorporated business owners there is a 5% discount on tax on the business income.

5. Trust distributions

Resolutions for distributions of trust profits to eligible beneficiaries must be made by 30 June.   (If you have not yet received a resolution for your family trust from us, please call us).

6. Division 7A Loans

The Div. 7 regulations are complex.   If a company makes payments for or loans to directors or associates these can be taxed to the director as a deemed, unfranked dividend.   Div. 7 allows the company to document the advance as a loan but it needs to be repaid with interest, over 7 years.

7. Trading Stock

Businesses have a choice on how to value stock, at its cost, or market value (eg., if it has to be discounted), or at replacement or obsolete stock value.   Each item can be valued on a different basis and the method used can be different each year.   The ATO can ask to see stock sheets.

8. Bad Debts

Non-recoverable debts need to be documented and written off before 30 June, not when the tax return is done some months later.

9. Bonus' and Director Fees

These do not have to be paid before 30 June, as long as they are approved and minuted, and paid within a couple of months of the year end.   Tax is deducted when the payments are made.

10. Depreciation

It is worth reviewing the list of assets and to write-off any items that have been scrapped.   The '$20,000 write-off' (see 1) also allows SME's to write-down to Nil the value of pool assets where the value at year end is less than $20,000.

11. Capital Gains

Capital gains tax is not complex, but the right to apply the small business concessions can be.   Assets held over 12 months and not on revenue account (eg., land acquired for development) can qualify for a range of concessions.   Don't just sell and hope for the best, this is one to ask about before the sale occurs.

12. Record keeping and IT

Online or cloud is not just another way of selling you more IT.   Talk to someone who knows what they are doing, not the salesman (if you need a referral to someone capable, call us).   Cloud-based software can save you money, both set up and usage, and give you more information on your sales invoices, bills and receivables, and also integrate with accounting software (like Xero).   You also need to be aware that your software has to report and pay super from 1 July 2015, (although this has been extended for a few months) send copies of pays each week to the ATO from 1 July 2016, and probably within a couple of years link to the ATO (Standard Business Reporting).   Technology is driving change in every industry, including tax.

13. Use professionals

Accountants and bookkeepers are trusted allies of small business, and most will save you time and money.   The cleaner the records, the less you pay, the more useful information you get, and the more profit you make.   It's tempting to save a few dollars and do things yourself, but your time will be better spent making sales.   I'm trying to say this nicely, but a lot of bookkeepers are doing more and even giving tax advice, often well above their ability and knowledge.   Be certain of what you want from your systems, if it's just BAS that's easy, but if you are making decisions, have the correct data and advice.

14. Change

You can be certain there will be more change to come, both federal parties have a tax reform process.   The tax white paper is reviewing many areas, including superannuation, franking credits, negative gearing, CGT concessions and loans from companies and trusts.   That is one reason we continue to raise concerns about structure, planning, and IT and send newsletters about changes in all areas, not only tax.

We'll certainly be reporting regularly on issues, like those mentioned above, to help keep you out in front.