As the end of the 2012-13 tax year fast approaches, take some time to consider the following tips for reducing your tax liability for the year.
Subject to cash flow, you could consider deferring any further invoicing for 2013 until July.
Prepayment Of Business Expenses
Small businesses (being business with average annual turnover of less than $2.0 million) should consider, where possible, making a prepayment of business expenses (e.g. rent, insurance, interest) so as to gain the benefit of the deduction in the 2012-13 year.
Superannuation Guarantee Charge (SGC)
The 9% SGC is payable at least quarterly and must be paid within 28 days of the end of the quarter. As superannuation is only deductable when paid, consider paying the June quarter’s SGC liability before 30 June to be eligible to claim a deduction this year. Also, we remind you that with effect from 1 July 2013 the SGC obligation increases from 9% to 9.25%.
Directors’ Fees, Bonuses Etc.
A deduction for directors’ fees, bonuses etc. can be achieved for the 2012-13 year by ensuring that a properly authorised resolution to pay the amount has been passed before year end. If this is done it won’t matter that the amount may not be paid until the following year. Further, you should also provide any employee entitled to a bonus with a letter prior to 30 June 2013 advising that the employee is entitled to the bonus and quantify the gross (pre-tax) amount in that correspondence.
Review debtors and write-off any bad debts by 30 June so that a bad debt deduction can be claimed in the 2012-13 year. Ensure that there is physical evidence that the debt has been written-off (e.g. an accounting entry or a decision made in writing at the board meeting). In addition, you must exhaust all possible avenues to collect the debt. It is not enough to simply make a provision for a bad debt.
Small business instant asset write-off threshold has increased from $1,000 to $6,500 starting form 1 July 2012.
Small businesses are now entitled to a $5,000 accelerated depreciation for a motor vehicle costing $6,500 or more. If the purchase price is less than $6,500 it can be deducted immediately.
Review your asset register and write-off any assets that have no value or are obsolete.
There can be a significant benefit to be had in allocating assets to depreciating asset pools just before year end. Speak to us for more information.
Consider if trading stock should be valued at cost, market value or replacement value.
Obsolete stock can be valued at below cost, market value or replacement value.
Review asset registers and, where possible, realise losses prior to 30 June so as to offset losses against realised capital gains in the 2012-13 year.
Unless losses are available, defer the signing of all contracts for the sale of assets until after 30 June.
Shareholder Loans & Division 7A
Shareholders who have borrowed money from their company must repay the loan in full or ensure that the appropriate loan agreements are in place, otherwise the amount may be treated as an assessable dividend to the shareholder under Division 7A of the Income Tax Assessment Act.
In order to ensure that you have “paid” the minimum annual repayment on such loans we advise that we need to ensure that a dividend has been declared and “paid” prior to 30 June. The dividend amount should equate to no less than the minimum annual repayment. Please contact our office to find out what you need to do in this respect prior to 30 June 2013.
Recent changes to the Australian Tax Office position on Trust Resolutions now require Trustees to prepare Trust Distribution Minutes before 30 June 2013. Trustees that are found not to have made a valid Trust Resolution by 30 June may require the Trustee to be assessed on the income at the top marginal tax rate, being 45%.
We advise that we are only working through the resolutions at the moment and encourage you to contact our office should you have any queries.
Where there is a new beneficiary to a Trust, that beneficiary must provide a Tax file Number (TFN) to the Trustees. Once received a TFN report must be lodged with the Tax Office within one month of the end of the quarter. If it is not completed Trustees must withhold 46.5% of the distribution to that beneficiary.