With tax time fast approaching, it is time to start thinking ahead. There are a number of opportunities to manage your 2019 tax liability that you should consider in the lead up to 30th June 2019.
To take the pressure off, we have listed the top 5 tax tips to action before it is too late.
You can also watch our tax expert Jason de Boer run through these top five tips here.
1. Make the most of the instant asset write-off
As part of the suite of Budget measures, the Government has increased the instant asset write off to cover depreciable assets up to a cost of $30,000. They have also significantly widened the scope of the concession, allowing businesses with a turnover of up to $50m to access the write off. These changes came in effect from Budget night (7.30pm 2 April 2019).
BDO Tax Partner Jason de Boer commented:
“The Government obviously sees value in the annual re-announcement of this concession. Providing taxpayers with certainty around capital expenditure rather than year-on-year extensions would be preferable. That being said, the greater accessibility of the concession is welcome and businesses should take the benefit of the write-off into account when evaluating their capital expenditure requirements.”
Many SMEs who historically have not been able to access this concession will now be able to claim an immediate tax deduction on their asset purchases. You should ensure you have put some thought into the capital needs of your business and make any required purchases prior to 30 June 2019 to lower your tax liability for the current tax year.
For the period prior to 2 April 2019, businesses with a turnover under $10m will still be able to obtain a full tax deduction for depreciable assets with a cost of less than $25,000 (between 29 January 2019 and 2 April 2019) and $20,000 (1 July 2018 to 28 January 2019).
Examples of assets that may qualify for the deduction include:
2. Get across the company tax rate changes
Unless you have paid no attention during this election cycle, which has seemingly gone on forever, you will know about the changes to the Australian company tax rate.
Whilst these changes may never reach the big end of town, it’s already good news for SME companies. Last year’s tax rate of 27.5% for companies with turnover under $25m now applies to companies with turnovers up to $50m.
If your company now falls under this threshold, make sure you factor in your tax cut of 2.5%! When it comes to distributing your profits, also be mindful of your applicable tax rate, as this could affect the franking percentage attributable to your dividends. Companies paying tax at 27.5% need to tale care when paying dividends out of income previously taxed at 30% as there could be a danger of trapped franking credits. Professional tax advice should be sought in these cases.
3. Get your super payments made on time
If you want to claim a tax deduction for your superannuation expenses, make sure all payments have been correctly processed before June 30, otherwise the opportunity for a deduction in this financial year passes. If your superannuation remains unpaid, not only will you not be eligible for a tax deduction, you may also be exposed to penalties – something no small business wants.
4. Clean up your debtors
While unrecoverable trade debts are a blow for businesses, you don’t want to also have to pay tax on the income derived in relation to those debts! Before June 30, if there are any trade debts that have gone ‘bad’, ensure these are written off, otherwise you’ll be paying tax on revenue your business is never going to receive.
Make sure any debts written off are properly documented through your accounting records prior to claiming a tax deduction (more on this in tip 5).
5. Keep strong records
With more and more funding being handed to the ATO in an effort to increase government revenues, it is becoming increasingly likely that you will hear from the ATO after lodging your tax return.
Should the ATO come knocking, the most effective way to ensure a smooth review process is to have comprehensive and well-presented records on hand, to answer any questions the ATO may have. Ensuring such documentation exists will not only save time – but also advisor fees!
The material contained on this website is general commentary only. The information posted here should not be regarded as advice and is not intended to replace consultation with a qualified professional or tax and accounting practitioner. We do not answer specific legal or financial questions. While we have made every attempt to ensure that the information contained in this site has been obtained from reliable sources, Winc Australia Pty Limited is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this site is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Certain links in this article connect to other websites maintained by third parties over whom Winc Australia Pty Limited has no control. Winc Australia Pty Limited makes no representations as to the accuracy or any other aspect of information contained in other websites.
Jason De Boer is a Tax Partner at BDO Australia with over seventeen years’ experience in dealing with general corporate and international taxation matters. Jason has also provided numerous tax-related presentations to the ATO, CPA and TIA, as well as external clients. He is part of the Advisory Panel to the Board of Taxation.
If you would like further information on the above please contact a BDO Tax adviser in one of BDO Australia’s many offices nationally. Visit the BDO website for contact details.