Tax planning is a year-round activity at Stanley & Williamson, but May and June are the time to double-check that any critical actions are taken before 30 June.
We’ve spoken to many clients throughout the year and will continue these discussions over the coming weeks about actions to take for their circumstances. As we approach the end of the year, we thought it worth reminding you of things that need to be attended to before the new year rolls around:
- Review your capital gains tax position for the year and take appropriate action. If you’ve made gains, do you have any unrealised losses you could crystallise before year-end to reduce the tax impact?
- For a small business turning over less than $2M annually, consider prepaying expenses up to 12 months in advance to get a deduction this year. For example, a company prepaying $10,000 of rent would reduce its 2016 tax bill by $3,000. Please note, under plans in the Federal Budget, this claim for prepayments is to be available to businesses turning over less than $10M from 1 July 2016.
- For small businesses planning to buy business assets (e.g., cars, machinery, office equipment) for up to $20,000, consider purchasing before 30 June to take advantage of the immediate write-off available for tax purposes. Please note, under plans in the Federal Budget, this immediate write-off will be available to businesses turning over less than $10M from 1 July 2016.
- For individuals, are there deductible expenses you know you have to pay soon that you could pay before 30 June to get a tax deduction this year? Examples might be income protection insurance, rates, strata levies, and insurance for investment property owners.
- If you have an investment loan, talk to the lender about whether you can pre-pay up to 12 months of interest. If you earn between $80,000 and $180,000, a prepayment of $10,000 would reduce your 2016 tax by $3,900.
- Depending on cash flow, businesses may want to defer invoices until after 30 June to put off the tax on this income until 2016/17. Also, reviewing any bad debts or obsolete stock and writing them off, if justified, would make sense.
- Businesses with plant and equipment should review the assets to see if any need to be written off or scrapped before 30 June to gain the tax deduction this year.
- Businesses should ensure they pay their employee’s superannuation contributions before 30 June to get the tax deduction this year.
- Businesses that pay bonuses to staff should pay them before 30 June to get a tax deduction. If the bonuses are committed to before 30 June but are based on a calculation of profit that can’t be done till after 30 June, then minute the bonus in the company’s statutory records so the deduction can be claimed this year.
- With the concessions available for changes in structures for businesses turning over less than $2M coming in on 1 July 2016, planning needs to be considered now as to whether you want to avail yourself of this opportunity.
- Ensure you read the Superannuation Budget update article in this edition, as there are changes to what can be done with contributions running up to 30 June and beyond.
The above is a tiny synopsis of some of the strategies that may be relevant to you. We will discuss any specific issues with you during tax planning running up to June.
As always, if you’re in doubt, you should call us to discuss your individual situation.
Kreston Stanley Williamson Team
*Correct as of May 2016
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.