2018 Business Tax Planning Guide
Here’s a guide to the strategies you can use to minimise your business tax.
1. IS YOUR BUSINESS A “SMALL BUSINESS ENTITY”?
Small businesses can access a range of tax concessions from the ATO. To qualify as a “Small Business Entity”, the business must have an aggregated turnover (your annual turnover plus the annual turnover of any business connected / affiliated with you) of less than $10 million and be operating a business for all or part of the 2018 year.
2. REDUCTION IN COMPANY TAX RATES FOR SMALL BUSINESSES
The company tax rate for businesses with less than $25 million turnover is 27.5% for the year ended 30 June 2018 (simply receiving rental and lease income will not mean you are running a business).
3. INSTANT DEDUCTION FOR ASSETS LESS THAN $20,000
If your business is a Small Business Entity, 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
- If your pool balance at the end of the year is less than $20,000 before applying any other depreciation deduction, the entire pool balance can be written off.
If you want to claim the deduction in this financial year, you should buy these assets before 30 June 2018.
The immediate deduction for assets valued at less than $20,000 has been extended until 30 June 2019. Something to keep in mind for the 2019 financial year.
If your business is not a Small Business Entity, you will need to depreciate all assets purchased over $300. Any assets purchased for $300 or under can be immediately deducted.
4. MAXIMISE DEDUCTIBLE SUPER CONTRIBUTIONS
The concessional superannuation cap for 2018 is $25,000 for all individuals. Do not go over this limit or you will pay more tax!
Note that 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 concessional contributions charge.
For the contribution to be counted towards the employee’s 2018 contribution cap, it must be received by the fund by 30 June 2018.
5. PAY EMPLOYEE SUPERANNUATION NOW
To claim a tax deduction in the 2018 financial year, you need to ensure that your employee superannuation payments are received by the super fund or the Small Business Superannuation Clearing House (SBSCH) by 30 June 2018.
You should avoid making last minute superannuation payments as processing delays may cause them to be received after year end.
6. 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, Personal Electronic Organisers, 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.
7. DEFER INCOME
If possible, defer issuing further invoices and receiving cash/debtor payments until after 30 June 2018. This strategy pushes tax payable to future years.
8. BRING FORWARD EXPENSES
Purchase consumable items BEFORE 30 June 2018. These include marketing materials, consumables, stationery, printing, office and computer supplies. Spend the money now and get the deduction this year.
9. REPAIRS & MAINTENANCE
Make payments for repairs and maintenance (business, rental property, employment) BEFORE 30 June 2018.
10. DEFER INVESTMENT INCOME & CAPITAL GAINS
If possible, 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 2018.
The Contract Date is generally the key date for working out when a sale occurred, not the Settlement Date!
11. MOTOR VEHICLE LOG BOOK
Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. You should make a record of your odometer reading as at 30 June 2018, and keep all receipts/invoices for motor vehicle expenses.
An alternative (with no log book needed) is to simply claim up to 5,000 business kilometres (based on a reasonable estimate) using the cents per km method.
12. INVESTMENT PROPERTY DEPRECIATION
If you own a commercial 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.
Note the depreciation report rules for residential properties changed effective the 9 May 2017. The new rules prevent investors from claiming deductions for depreciation of ‘previously used’ depreciable assets within second-hand residential properties. That is if you have purchased a residential investment property after this date, which has plant & equipment already installed and being used you can no longer claim a depreciation deduction for this equipment. You still can claim a capital works deduction.
13. PRIVATE COMPANY (“DIV 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 2018. Current year loans must be either paid back in full or have a loan agreement entered in 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. YEAR END STOCKTAKE / WORK IN PROGRESS
If applicable, you need to prepare a detailed Stock Take and/or Work in Progress listing as at 30 June 2018. Review your listing and write-off any obsolete or worthless stock items.
Talk to us about your different options for valuing Stock, and how they affect your tax payable.
15. WRITE-OFF BAD DEBTS
Review your Trade Debtors listing and write off all Bad Debts BEFORE 30 June 2018. Prepare a management meeting document listing each Bad Debt, as evidence that these amounts were actually written off prior to year-end, and enter these into your accounting system before 30 June 2018.
16. 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 2018 and obtain a full tax deduction in the 2018 financial year.
17. TRUSTEE RESOLUTIONS
Ensure that the Trustee Resolutions are prepared and signed BEFORE 30 June 2018 for all Discretionary (“Family”) Trusts.
We are currently working with our trust clients to ensure appropriate trust resolutions are prepared and signed prior to this date.
General advice disclaimer
The information provided is of a general nature only, in preparing it we did not take into account your investment objectives, financial situation or particular needs.