Year-End Tax Planning – Make sure you don’t miss the boat!

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It is that time of year again, and you should be proactive in tax planning for the year-end to ensure you do everything legally and won’t pay any more tax than you have to. In the June S & W Insight edition, we usually review everything you should be doing until 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 contacted all our business clients before year-end to discuss 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 before year-end
  • Review trading stock for possible write-downs
  • Write off bad debts before 30 June
  • Can you make any donations before 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 Personal Services Income rules issues need to be resolved with the required salary by 30 June.
  • If you wish to change the structure, 1 July is the easiest and cheapest time to start the new structure.
  • Companies must 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 with 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 can now claim super contributions made personally even if your employer also makes contributions for you. Review whether you contribute 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 will be distributed this year? This decision on the distribution must be made before 30 June.

The above lists should remind you of any areas you may have forgotten. Please get in touch with your client manager if you wish to clarify something.

Kreston Stanley Williamson Team

*Correct as of June 2018

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.

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