While tax-effective structures may be in place to reduce tax, end of year tax planning strategies look at the position of each business or individual and seek to take advantage of legitimate tax minimisation opportunities and techniques.
Tax planning is best done between April and June to ensure that advisors have enough information about the performance of businesses and investments throughout the year and also enough time to ensure strategies are put in place.
It is important to note that the information on the following strategies is general in nature and we therefore strongly recommend you contact our office before proceeding with any year end planning opportunities discussed below.
- Superannuation – Increased superannuation deductions may be available for persons in business who wish to contribute additional amounts to a superannuation fund. The maximum contributions that individuals are allowed in the 2013/14 year are as follows:
– Individuals under 60 years of age – $25,000
– Individuals over 60 years of age – $35,000
- Prepayments – Look at any expenses that are due to be paid in July, August and September. If you bring payment of these expenses forward in June you can reduce your tax (ie Insurances, Seminars, Subscriptions, Repairs). Non-small business entities are subject to the prepayment rules above (ie $1,000 expense limit) if the expense is a prepayment.
- Bad Debt Write Off – To write off a bad debt, a deduction will be allowable where a taxpayer makes a bona fide, commercial decision that a debt or portion of a debt is irrecoverable. However, the debt must have been brought to account as assessable income and must be written off during the year of income in which it is claimed. Normally, this means that it must be physically written off in the books of account, although the Australian Taxation Office (ATO) will accept minutes of a board meeting authorising the write-off of a specific debt before year end.
- Stock Write Offs – The value of trading stock on hand at the end of the year of income is effectively added to assessable income. Therefore, scrapping unwanted stock or writing off obsolete stock has a direct effect on the bottom line of the business. Obsolete stock includes stock which is going out of use, going out of date, or becoming unfashionable or outmoded. Unwanted stock on hand should be physically scrapped or sold for scrap by 30 June 2013.
- Capital Gains Tax (CGT) Planning Deferring Capital Gains- In relation to CGT, properties are normally deemed to be disposed on the date when the contract is signed. For real estate sales, this means that the date of the contract is normally the date the Offer & Acceptance (or similar document) is signed rather than the settlement date. If a property is liable for CGT on disposal it may be worth considering delaying signing until after 30 June. This may have the advantage of deferring CGT until the following financial year.
It is of vital importance that you contact our office prior to purchasing or selling any significant assets and that means before executing any relevant documentation
As indicated above it is important that you contact CNS Partners before implementing any strategies.