Thursday, 16 June 2016

Last-Minute Strategies to Consider Before 30 June 2016

30 June 2016 is fast approaching, and now is the time to think of everything possible to minimise tax and prepare for the 2017 financial year. Why, you ask? Because as our friend and childhood mentor Homer Simpson states:
With this in mind, we have listed some strategies below which you should consider implementing before 30 June 2016.

Individuals:
  1. Are you going to have significantly less income next year? Then you should consider the following strategies to help bring forward deductions, to reduce your income this financial year (and pay less tax overall):
    1. Prepayment of interest – If you have loans that are deductible (i.e. rental property loans), then you should consider prepaying the next 12 months’ interest in advance and claim the tax deduction in the current financial year.
    2. Income protection insurance premiums – As per the above, if you have income protection insurance, you can consider prepaying some premiums and claim the tax deduction in the current financial year.
    3. Going to make a donation soon? Why not make it in this financial year, while your income is higher, and receive a greater tax benefit.
    4. Work related expenses and materials – you could consider bulk purchasing these in the current financial year to maximise your deduction.
  2. Review and capital gains and losses If you have sold an asset this financial year with a significant capital gain, you may want to consider selling other assets which have made capital losses to offset this gain. Remember, it is the exchange date which determines the year the capital gain is reported to the ATO, not the settlement date.
  3. Recently purchased a rental property in Canberra? Then make sure you pay your stamp duty before 30 June 2016. Stamp duty on rental properties in Canberra is tax-deductible!
  4. Review superannuation contribution strategies
With all the changes proposed to superannuation, it is important to speak with your adviser to determine whether your current superannuation strategy is still practical. This includes reviewing:
  • Salary sacrifice arrangements
  • Personal deductible contributions
  • Personal non-deductible contributions
  • Transition to retirement strategies.
It is also important to make sure you have not exceeded the concessional contributions cap (currently $30,000 or $35,000 depending on your age) and to ensure you have filled out a ‘notice of intent’ with your superannuation fund for any personal contributions that you want to claim as a tax deduction.

Businesses:
  1. Company tax rate The company tax rate for the current financial year is 28.50% for small business entities and 30% for all other companies. From 1 July 2016 it is likely that the company tax rate for small businesses will reduce to 27.50%. Therefore, a tax deduction in the current financial year provides a greater benefit for small businesses than a tax deduction in the next financial year. With this in mind, strategies which delay income and recognise expenses earlier will not only delay the tax liability but actually reduce the total liability!
  2. Stocktake It is important to have an accurate record of stock on hand as at 30 June 2016. This will give you options when choosing the method to value your stock for tax purposes - a lower value for stock on hand will decrease profit and tax payable.
  3. Superannuation – In order for superannuation to be deductible, it needs to have been physically paid, so make sure you pay any outstanding superannuation by 30 June 2016.
  4. Buying new assets – If you are a small business entity and are planning on buying an asset that costs less than $20,000, you should consider purchasing the asset before 30 June 2016. This will ensure you receive the tax benefit sooner.
  5. Write off bad debts Any debts that are non-collectable need to be physically removed from your accounting books (written off) in order to receive a tax deduction. A mere provision for bad debts will not provide a tax deduction.
  6. Delay income Ensure you are not invoicing clients or customers in June for work that will not be completed until the next financial year.
  7. Increase expenses  Need to purchase more office supplies? Now is the time. Running low on materials? Buy up now…. you get the point.

Remember the power is in your hands to implement a lot of these strategies, so be a smart tax payer/business owner and do it!

If Homer Simpson has taught us anything in life, it is that if someone else can do it for you, let them! So if you haven’t spoken with your accountant lately, now is the time. These strategies can save you thousands of dollars in tax if used correctly!

Call us on 02 6171 6000.

1 comment:

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