Year end Tax Planning – make sure you don’t miss the boat!

Year end Tax Planning – make sure you don’t miss the boat!

It is that time of year again and you should be proactive in planning for the year end to make sure you do everything you legally can to make sure you don’t pay any more tax than you absolutely have to. In the June addition of the S & W Insight we usually go through all the things that you should be doing running up to year end. We have done this in detail in the past. We believe we have trained our clients well and they do not need full details of what to do but rather just a reminder of the items for them to undertake.

As always we have and will be contacting all our business clients prior to year end to talk them through what they need to do.

The areas you need to review by year end are as follows:

  • Defer income by delaying invoicing
  • Bring forward expenditure by incurring the expense prior to year end
  • Review trading stock for possible write-downs
  • Write off bad debts before 30 June
  • Are there any donations you can make prior to 30 June to get the deduction this year?
  • Prepay expenses if relevant to the size of your business. You can claim prepaid expenses this year if your turnover is < $10M.
  • Pay superannuation contributions for yourselves if relevant and ensure paid, along with employees’ contributions before 30 June to get the deduction this year.
  • Write off plant and equipment that is not used or has been scrapped.
  • Remember, in this 2018 tax year you can claim, straight away, expenditure on plant and equipment of less than $20,000 if you are a small business (small business is now defined as turnover < $10M).
  • Ensure loans to shareholders are under control with adequate repayments and loan agreements in place.
  • Any bonuses due to employees should be paid before 30 June to get tax deductions this year, or if committed to this year but based on a profit calculation that can’t be done until after 30 June, minuted in the statutory records that they are to be paid.
  • Any issues with the Personal Services Income rules need to be resolved with the required salary by 30 June.
  • If you wish to change structure, 1 July is the easiest and cheapest time to start the new structure.
  • Companies need to consider which franking rate they may be on after 1 July 2018. Where the company is likely to move to a tax rate of 27.5% from 1 July (and therefore a franking rate of 27.5%) it might make sense to pay dividends at the higher franking rate of 30% this financial year rather than after 1 July.

Some questions you should ask yourself by year end in relation to your business or personal affairs include:

  • Have you got your income producing assets in the correct name to minimise tax?
  • Have you made capital gains this year? Do you have the ability to crystallise capital losses before 30 June to offset them?
  • In your own hands, do you have the ability to prepay interest on any loan used to acquire income producing assets?
  • Since 1 July 2017, as an employee, you are now able to claim super contributions made personally even if your employer makes contributions for you as well. Review whether you make a contribution before 30 June up to your maximum total allowed of $25,000 (including contributions made by your employer).
  • Do you need to review or adjust your salary packaging to utilise any and all concessions that may be available to you?
  • If you have a trust, have you done the distribution minute evidencing where the income is to be distributed this year. This decision on the distribution must be done before 30 June.

The above lists should remind you of any areas you may have forgotten. Please feel free to contact your client manager should you wish to clarify something.

Kreston Stanley Williamson Team

*Correct as of June 2018

*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to 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 contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under professional standards legislation.

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