General year-end tax strategies
Business Income and Expenses
Subject to cash flow requirements, consider deferring income until after 30 June, especially if you expect lower income for 2016/17 compared to 2015/16.
Most businesses are taxed on income when it is invoiced. Some small businesses may be taxed only when income is received. Income from construction contracts is generally taxed when progress payments are invoiced or received.
Keep in mind the key initiative for small business
- Immediate tax deduction for items up to $20,000 if installed and ready for use between 12/05/2015 and 30/06/2017;
- Immediate deduction if value of existing depreciation pool is less than $20,000;
- Reduction in company tax rate from 30% to 28.5% for 2016 FY;
- Immediate deduction for business start-up expenses;
- FBT exemptions for providing employees with work related electronic devices;
- CGT relief for business restructures;
- Employee Share Schemes to become more accessible to small business.
Ensure that you have complied with the requirements to claim deductions in 2015/16:
- Bad debts must be written off in your accounts before 30 June
- Employer and/or self-employed superannuation contributions must be paid to, and received by, the super fund before 30 June and must be within the contributions cap ($35,000 for individuals aged 49 or over on 30 June 2014, otherwise $30,000)
- Depreciation can be claimed for assets first used, or installed ready for use, before 30 June
- Small businesses can claim expenses prepaid up to 12 months in advance – for larger businesses, this is generally limited to expenses below $1,000
- Wages paid to your spouse or family members must be reasonable for the work performed
Small businesses planning major purchases or replacements of capital equipment should contact us for advice. Careful timing of those transactions can result in substantial tax savings.
Review valuations of trading stock in the lead up to 30 June. Best practice is generally to value stock at the lower of cost or market selling value. This may change if you expect a tax loss for 2014/15, or substantially higher income in 2015/16 compared to 2014/15.
Personal Income, Deductions and Tax Offsets
Subject to cash flow requirements, set term deposits to mature after 1 July, rather than before 30 June.
Consider realising capital losses if you have already realised capital gains on other assets during 2015/16. Conversely, consider realising capital gains if you have un-recouped capital losses, or you expect substantially higher income in 2016/17 compared to 2015/16.
If you expect lower income in 2016/17 due to retirement or any other reason, consider deferring income until after 1 July, when you will be in a lower tax bracket. If you are a primary producer and you expect a permanent reduction in income, consider withdrawing from the income averaging system.
Access to the Net Medical Expenses Tax Offset is restricted compared to previous tax years, but the tax offset is still available if you meet the conditions. If you have incurred large out-of-pocket medical expenses in 2014/15, contact us for advice.
Arrange for deductible donations to be grouped in the higher income year, if you expect substantially higher or lower income in 2015/16 compared to 2014/15. Make all donations in the name of the higher income earner.
If you plan to purchase income-producing assets, consider acquiring assets that will generate positive cash flow in the name of the lower income earner.
Conversely, consider acquiring negatively geared assets in the name of the higher income earner.