Immediate Deduction – Small Businesses with an aggregated annual turnover of less than $10 million can still get an immediate tax deduction for nearly all individual assets purchased by 30 June 2018 that cost less than $20,000.
Company Tax Rate Companies with an aggregated annual turnover of less than $25 million will pay tax at 27.5% in 2017-18. However, companies with a turnover below $25 million that earn their income from passive investments such as rental income or interest income may continue to pay tax at 30%.
Year End Trust Resolutions Trustees of discretionary trusts must make and document year end trust income resolutions for the 2017-18 financial year by 30 June 2018. If a valid resolution is not executed by 30 June, default beneficiaries under the deed will become presently entitled to trust income and subject to tax or worse, the trustee is assessed on all the trust income at the highest marginal rate of tax.
Company loans – Div.7A The Tax Act can potentially treat the following loans/advances/the like as an unfranked deemed dividend for a taxpayer unless an exemption applies:
- a payment or a loan by a private company to a shareholder or an associate (like a family member)
- the forgiveness of a shareholder’s or associate’s debt
- the use of a company asset by a shareholder or their associate, or
- the transfer of a company asset to a shareholder or their associate.
The most common exception is a Div. 7A compliant loan agreement requiring minimum interest and principal repayments over a specified loan term, generally under the Tax Act as being 7 or 25 years depending on whether the loan is secured or unsecured.
Further, an unpaid distribution owed by a trust to a related private company beneficiary will be treated as a loan from the company. However, this may be prevented if the unpaid distribution is paid out, or a complying loan is set up.
Write-off Bad Debts Businesses can only obtain a tax deduction for bad debts written off pre-June 30. However, a deduction will only be available if the debt still exists at the time it is written off. If the debt is forgiven or compromised, a deduction may not be available as a debt must be effectively unrecoverable and written off for a deduction to be available.
Paying Employee Bonuses If you pay staff bonuses and you want to bring expenses into the 2017-18 year, ensure they are quantified and documented in a properly authorised resolution (e.g. Board minute) prior to year-end. This will enable a deduction to be incurred for employee bonuses where such amounts are not paid or credited until the subsequent year.
Pay any Outstanding Superannuation Entitlements The Federal Government has announced a 12-month amnesty from 24 May 2018 for employers to pay any outstanding Superannuation Guarantee Charge (SGC) contributions for periods prior to 1 April 2018.
Employers who voluntarily disclose and pay previously undeclared SGC shortfalls during the Amnesty and before a SGC audit will not be liable for the administration penalties and will be able to claim a tax deduction for payments made during the 12-month period.
30 June Year End Business Tax Tips
Here below are some quick and easily implemented 30 June Business Tax Tips to help you preparing for the end of the tax year:
- Cashflow permitting, defer invoicing customers until post 30 June.
- Prepay any tax-deductible expenditure.
- Review your depreciable plant register and write of items where applicable. Identify any assets requiring re-assessment of effective useful life. Consider scrapping any assets on the asset register prior to 30 June.
- Time the disposal of Capital Gains Tax assets to ensure you meet the 12-month holding requirement for the CGT discount.
- Realise capital losses prior to year-end if you’ve already made a capital gain, or you will make a capital gain, from the sale of property or shares before 30 June.
- Passive Income – Where possible, you should establish bank accounts in the name of the lowest income earner in the family group.
- Utilise family members with lower tax brackets for trust and dividend distribution.
- Ensure all creditor invoices are received prior to closing off the 30 June accounts.
- Review Stock on Hand to determine obsolete items to be written off and whether Cost or Market value is the appropriate valuation methodology.
Disclaimer: The contents herein are intended for general information only and should not be construed as legal or accounting advice. Vicca Chartered Accountants Brisbane bears no responsibility for any loss that might occur from reliance on information contained in this publication. Please do not reproduce, transmit or distribute the contents herein in any form without prior permission from Vicca Chartered Accountants, Taxation Accountants Brisbane Australia.