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Year-end Tax Planning Tips for Small Business - 2012
So you’ve had a pretty good year and not given too much thought to tax? Perhaps it’s been a niggling worry at the back of your mind. Something you’ll deal with later? To get the best tax outcome, now is the time to give tax planning some attention.
As a small business owner, here are some things for you to consider as the financial year rolls to an end:
- Super contributions need to be received by the super fund 30 June in order for you to claim a tax deduction this financial year.
- A quick rundown on the various superannuation incentives:
- salary sacrifice arrangements
- government co-contribution for low income earners
- tax offset for low-income spouse contributions
- non-deductible personal contributions (for those wishing to ‘park’ money in a low-tax environment until they retire)
- A small business electing to use the Simplified Depreciation rules can claim an immediate write-off for assets costing less than $1,000. If you don’t use Simplified Depreciation, you must depreciate assets costing $100 or more.
- It may be worth delaying the purchase of some assets until after 30 June. From 1 July 2012, a small business will be able to claim an instant write-off for assets costing up to $6,500. An immediate write-off will also be available for the first $5,000 cost of a newly acquired motor vehicle.
- If you’re selling a capital asset, you may wish to delay the exchange of contracts until after 30 June to defer the tax until another year.
- If you already have a large capital gain this year, you may wish to consider crystallising capital losses from other assets to offset the capital gain in the current year.
- Review inventory for write-down or obsolescence. To claim a tax deduction for obsolete inventory, it needs to be disposed of or sold by 30 June.
- Small businesses can use the Simplified Trading Stock rules
- Organise a 30 June stock take, if one is required (if the difference between closing stock and opening stock value is more than $5,000) or if you choose to use the general trading stock rules.
Employee contributions can often result in a better tax outcome than paying fringe benefits tax. Employee contributions should have been received by late May but, if they haven’t, get them in before 30 June.
Review your trade debtors for any bad debts to be written off by 30 June, in order to claim a tax deduction for them this financial year.
- A small business can claim an immediate tax deduction for expenses prepaid up to 12 months ahead.
- Business consumables (e.g. stationery and office supplies) can be immediately expensed.
Some Extra Pointers
- The flood levy (0.5% to 1%) applies to individuals in this tax year (2011/12) only
- The Medical Expenses Tax Offset will be means tested after 1 July 2012
- The Entrepreneurs Tax Offset ceases to apply after this tax year (2011/12)
- The superannuation concessional contributions cap for people aged 50 and over will be reduced from $50,000 to $25,000 for the next two years, effective from 1 July 2012
- Voluntary HECS/HELP payments attract a 5% discount - useful if your debt is nearly paid off
- Discretionary trust distribution resolutions need to be documented by 30 June
Get your tax information to your accountant early so you have plenty of time to prepare for your tax bill (or get your tax refund early) and your accountant can give you some useful pointers for the new tax year!