As we near the end of the 2017/2018 financial year, it’s a great time to start thinking about how to maximise your tax deductions so you can get a better tax refund. Consider some of the following tips on how you might be able to make the most of this financial year.
1. OBSERVE ONE-OFFS
a) Small Business Entities (SBE) concessions (turnover < $10m)
If you run a company with an aggregated turnover of less than $10 million, you are classed as a Small Business Entity (SBE). With this classification comes a number of concessions available, including simplified depreciation rules, simplified trading stock rules, prepayment rules, GST/BAS consessions, PAYG instalment concessions and a reduced company tax rate – to name a few.
b) Consider capital allowances/depreciation.
Small business entities those with a turnover of less than $10 million – have the benefit of the $20,000 instant asset write-off until 30 June 2018. This applies to depreciating assests that cost less than $20,000 each and were bought and used in the business in the current financial year.
2. TAKE NOTE OF TIMING
a) Bring forward expenses, defer income.
Suspending invoicing will result in a deferral of income which means you will also defer paying tax on it. This is particularly valuable if you are predicting to pay tax at a lower rate in the coming financial year. It’s important to be aware of cash flow implications when making this decision.
b) Pay all SGC before June 30.
The Super Guarantee Charge (SGC) requires employers to provide a set, minimum level of superannuation to each employee each year. Missed payments may incur an SGC which is not tax-deductible. You can, however, claim a tax deduction for employee super payments in the financial year you make them.
3. IMPLEMENT A STRUCTURE REVIEW
a) Reduce your corporate tax rate.
From this financial year, companies that have a turnover threshold less than $25 million must apply the lower 27.5% company tax rate.
b) Use companies as investment vehicles.
‘Investment vehicle’ refers to any process where individuals or companies invest and, ideally, grow their money. Talk to us about how to maximise the use of companies as investment vehicles.
4. INVESTIGATE YOUR INVESTMENT PROPERTIES
a) Prepay your interest.
Prepaying your interest is a great way to manage cash flow and budget for the financial year. It can reduce the worry about variable interest rates and is tax deductible in the year it is paid.
b) Maximise your tax-deductible debt.
If the purpose of any debt is to produce taxable income, you can claim the interest as a tax deduction. Contact MDH today to learn more about your tax-deductible debt.
c) Get a qualified QS (quantity surveyor) to prepare depreciation reports.
To submit and process tax depreciation claims and/or schedules, a report must be completed by an ATO-compliant quantity surveyor. Unfortunately, tax depreciation reports can only be completed by building professionals such as quantity surveyors, which often rules out accountants.