2016 Tax Planning for Businesses
Posted on June 2nd, 2016 by WLF
The end of the 2015/16 financial year is almost upon us, can you answer these 20 questions to save you tax?!
1. Are you aware of what impact the federal budget may have on you or your business?
2. Have you maximised your concessional superannuation contributions within the caps?
Concessional Superannuation Cap
The concessional superannuation cap for 2016 is $30,000 per year for persons aged under 50 as at 30/6/15, and $35,000 for persons aged 50 to 75. Do not go over this limit, or you will pay more tax.
Employer super guarantee contributions are included in these caps. Where a concessional contribution is made that exceeds these limits, the excess is included in your assessable income and taxed at your marginal rate, plus an excess contribution charge. In order to claim a tax deduction in the 2016 financial year, the super fund must receive the contribution by 30 June 2016.
3. Can we increase your asset depreciation deductions?
If your business is a Small Business Entity (turnover less than $2 million), the following tax concessions apply:
• Depreciating assets valued at less than $20,000 will be immediately deductible
• Depreciating assets valued at more than $20,000 will be depreciated in one pool at a rate of 15% in the first year and 30% in future years.
4. Have you purchased necessary tools of trade / FBT exempt items?
Tools of Trade / FBT Exempt Items
The purchase of Tools of Trade and other FBT exempt items for business owners and employees can be an effective way to buy equipment with a tax benefit. Items that can be packaged include Handheld/Portable Tools of Trade, Computer Software, Notebook Computers, Digital Cameras, Briefcases, Protective Clothing, and Mobile Phones.
If structured correctly, the Employer will be entitled to a tax deduction for the reimbursement payment to the employee (for the equipment cost), claim any GST input credit, and the employee’s salary package will only be reduced by the GST-exclusive cost of the items purchased. You should buy these items before 30 June 2016.
5. Can you pay your employee super guarantee payments before 30 June?
Employee Superannuation payments
To claim a tax deduction in the 2016 financial year, you need to ensure that your employee superannuation payments have cleared your business bank account by 30 June 2016.
Also, check that your payroll system is paying the required rate.
6. Can you bring forward any expenses?
Bring Forward Expenses
Purchase consumable items before 30 June 2016. These include stationery, printing, office and computer supplies.
7. Do you need to undertake any repairs & maintenance?
Repairs & Maintenance
Make payments for repairs and maintenance (business, rental property, employment) before 30 June 2016.
8. Have you completed motor vehicle log books?
Motor Vehicle Log Book
Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2016. You should make a record of your odometer reading as at 30 June 2016, and keep all receipts/invoices for motor vehicle expenses. Should the nature of the travel, vehicle or business use % have not changed you can use the log book for a 5 year period.
9. Can you defer investment income and capital gains?
Defer Investment Income & Capital Gains
Where practical, arrange for the receipt of Investment Income (e.g. interest on Term Deposits) and the Contract Date for the sale of Capital Gains assets, to occur after 30 June 2016.
The Contract Date is generally the key date for working out when a sale occurred, not the Settlement Date.
10. Do you have a Property Depreciation Report for your investment property?
Investment Property Depreciation
If you own a rental property and haven’t already done so, arrange for the preparation of a Property Depreciation Report to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property.
11. Have you reviewed your debtors and written off any bad debts?
Write-off Bad Debts
Review your Trade Debtors listing and write off all Bad Debts before 30 June 2016. Prepare a minute of a meeting, listing each Bad Debt, as evidence that the amounts were written off prior to year-end.
12. Can you defer any income?
Where practical, defer issuing further invoices and/or receiving cash/debtor payments until after 30 June 2016. Not only will this defer tax until the 2017 year, it can potentially save tax due to the proposed drop in the company tax rate for SBE’s, and for unincorporated SBE’s the tax discount.
13. Are any actions required to resolved private company (Division 7A) loans before 30 June?
Private Company (“Division 7A”) Loans
Business owners who have borrowed funds from their company in previous years must ensure that the appropriate principal and interest repayments are made by 30 June 2016. Current year loans must be either paid back in full or have a loan agreement entered into before the due date of lodgement for the company return or risk having it counted as an unfranked dividend in the return of the individual.
14. Have you quantified and valued your stock on hand / work in progress?
Year End Stock Take / Work in Progress
If applicable, prepare a detailed Stock Take and/or Work in Progress listing as at 30 June 2016. Review your listing and write-off any obsolete or worthless stock items.
15. Can you make any small business concession prepayments?
Small Business Concessions – Prepayments
“Small Business Concession” taxpayers can make prepayments (up to 12 months) on expenses (e.g. Loan Interest, Rent, subscriptions) before 30 June 2016 and obtain a full tax deduction in the 2016 financial year.
16. Do you have the necessary information to prepare Trustee Resolutions by 30 June?
Ensure that the Trustee Resolutions are prepared and signed before 30 June 2016 for all Discretionary (“Family”) Trusts. If you have a Trust, you would have received correspondence from us regarding this requirement.
17. Do you know where your business cash has gone in 2016? And what your cashflow requirements are for 2017?
We all know that cash is key for any business. Do you have sufficient cashflow or working capital for your future needs? We suggest preparing a cashflow budget for 2017 if you haven’t already done so.
18. Is your business structure still appropriate and optimal?
The lead up to a new financial year is a great time to consider if your business is operating out of an optimal structure, not only for tax purposes but also asset protection. The new Small Business Rollover concessions provide opportunity for a small business entity (SBE) to change their business structure without triggering untoward tax consequences, so now is as good a time as any to review your structuring.
19. Have you set your goals / KPIs for 2017 and beyond?
Clarity of business direction and the setting of relevant business key performance indicators is vital to making smart decisions for the future of your business. Equally important is your ability to monitor and measure progress.
20. Do you have any plans for 2017 that we need to talk about now for effective planning and future tax minimisation?
Talk to us
We can’t suggest strongly enough that you contact us before you implement actions that may trigger a tax consequence, as there may be things we can do to optimise the outcome for you and minimise the tax burden. A bit of upfront planning can go a long way.