Cruising through the finish line – Tax tips for EOFY
The end of financial year can sometimes feel like a race to the finish. To help you cruise through the finish line come June 30, we’ve prepared a handy list of tips for both businesses and individuals.
Small business tips
1) Pay expenses, delay income
In most cases, it can be prudent to look for ways to bring forward tax-deductible expenses to the current financial year and delay income until July.
You may be able to pre-pay 12 months interest on a margin loan, or pre-pay 12 months premiums of income protection insurance held outside super, and claim the full deduction in this year’s return. You might also consider pre-paying membership fees for professional organisations and subscriptions for work-related publications.
2) Bad debts and obsolete stock
Think about writing off any bad debts in the business before June 30. You must have documentation to show you have made serious efforts to recover the debts which must have been previously included as assessable income.
Similarly, if you’ve got any inventory that you’re struggling to clear, it might be worth considering writing off or writing down obsolete stock.
3) Car expenses
When it comes to car expenses there are multiple ways to claim and calculations can be complex. It’s wise to get some advice on which method suits your company best.
4) Instant asset write-off
The threshold for the instant asset write-off has risen again by $5,000 and extended to include medium-sized businesses with turnover less than $50 million. Given that there have been a number of changes to the threshold, the amount you can claim will depend on when the asset was purchased or installed.
Relevant thresholds for the year:
|$30,000||7.30pm (AEDT) 2 April 2019 – 30 June 2020|
|$25,000||29 January 2019 – 7.30pm (AEDT) 2 April 2019|
|$20,000||Before 29 January 2019|
Superannuation is another area to consider at the end of the financial year, both for you and your employees. While employees’ super guarantee contributions don’t need to be paid until July 28, it makes sense to pay them by June 30 so you can claim the tax deductions in the current year.
Don’t just assume that once you’ve paid the super contribution electronically it will be received by the super fund on the same day. What we’ve found is it can take up to 3 weeks from when you pay the contribution to the super clearing house to when it is received by the fund. this is important as you can only claim the deduction this year if the contribution is received by the fund on or before 30 June.
Personal EOFY tips
1) Topping up your super
Topping up your super before June 30 can be tax effective and assist you towards a more comfortable retirement. There are many ways to do this such as personal deductible contributions, salary sacrificing, or spousal contributions. If you are struggling to meet the $25,000 cap, as of July 1, you will be able to carry forward any unused cap amount for up to five years if you have less than $500,000 in super. Talk to us about which strategy will work best for you.
2) Review your investment portfolio
After a mixed year on global share markets, you may be sitting on paper losses on some of your stocks. This could be a good time to sell some of your poor performers to offset against capital gains made on the sale of other investments over the past 12 months. Look to sell investments held for at least 12 months if you want to take advantage of the 50 per cent capital gains tax discount, while also taking into account your longer-term investment goals.
3) Claiming relevant deductions
Work related expenses – You’re entitled to claim deductions for certain work expenses, most of which are directly related to earning your income such as tools, uniform and travel expenses.
Rental property – You can claim an immediate deduction for interest on your investment loan, maintenance and tenancy costs such as the preparation of a lease or eviction. Some expenses are also claimable over a number of years, such as the cost of depreciating assets, structural improvements and borrowing expenses such as stamp duty and loan fees.
Tax time doesn’t have to be a hassle if you get prepared early. Both business owners and individuals should start getting their books in order now to make the most of any concessions before the June 30 cut-off. And remember, we’re always here to help to make reaching the EOFY finish line a walk in the park.