End of Year Tax Planning Tips – Business
With many businesses simply trying to survive, conserve cashflow and make it through COVID-19 its timely to remember that tax is a cost which needs to be addressed. Detailed below are some helpful hints in managing your tax prior to 30 June.
Whilst most eligible businesses have registered and are receiving payment, some key points to remember about Job-keeper:
- The test for eligibility only needs to be satisfied once and then you remain eligible for the entirety of the program in its present form regardless of your turnover;
- Note that you can qualify for any period (May, June, July, August or September) and claim from that period onwards;
- Business owners that are not employees can also qualify and be paid the Job-keeper; and
- Make sure you continue to pay your qualifying employees the fortnightly $1,500.
Instant Asset Write-Off – Assets costing less than $150,000
Businesses with turnover of less than $500 million can claim an immediate tax deduction for each asset (new or second hand) purchased and first used from 12 April 2020 to 31 December 2020.
Businesses with turnover of less than $500 million can claim accelerated depreciation for assets (new or second hand) costing more than $150,000 up until 30 June 2021. In these circumstances the first year deduction is calculated at 50% of the cost of the asset plus 50% of the normal depreciation amount able to be claimed. In future years, the depreciation amount is 50% of what would normally be claimed.
Most businesses operate and report their income based on invoices issued. Whilst maintaining a keen eye on cashflow the impact of issuing invoices into the next financial year means tax won’t be payable on that income until the next financial year.
Trading stock can be valued at the lower of cost, market value or replacement value for tax purposes each year. Undertaking an effective stocktake can identify obsolete stock which can be written off or at the very least written down to clearance prices, reducing your taxable profit.
Be mindful of any income that you invoice for services which you provide post 30 June. Depending upon the terms and conditions of your agreement whilst the income may be invoiced prior to 30 June if the services are provided after 30 June you may be able to defer the recognition of that income until the new financial year.
Superannuation Contributions for Staff
Superannuation contributions paid by employers are only tax deductible at the time of payment, whilst many employers will not pay their June quarter superannuation until 28 July consider making the payment before 30 June to get your tax deduction.
Bad Debts – Write off
Review your debtors prior to 30 June and where there is no or minimal chance of recovery, write the debts off prior to 30 June so that you are not paying tax on those amounts you won’t receive.
Withholding Tax on Payments
Ensure that when you are making payments (particularly to individuals) that you have made the appropriate PAYG (Pay as you Go) withholding from the payment. With effect from 1st July 2019 a failure to withhold the correct amount from such payments will make the amount not tax deductible.
Research & Development Tax Incentive
Companies that spend money on eligible Research & Development activities may be eligible for a refundable or non-refundable tax offset. Note that the expenditure must be paid prior to 30 June and that registration with AusIndustry must occur 10 months after end of financial year (usually 30 April).
Export Market Development Grant
The Federal Government provides for financial assistance for exporters by reimbursing up to 50 per cent of eligible export promotion expenses (above $5,000) provided there is a minimum spend of $15,000.
The grant applies to Australian businesses with a turnover of less than $50 million and must have promoted either, export of goods or services, inbound tourism, export of intellectual property or conferences and events held in Australia.