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Whilst this financial year is almost over, there are still effective strategies you may be able to employ to make sure you pay the right amount of tax for the 2020-21 year and maximise any refund entitlements.
Cash Flow
Given the uncertain times in which we currently live, cash-flow, being the lifeblood of any business, is more important than ever. When considering your tax planning strategies, ensuring that any expenditure does not jeopardise your cash flow should be your first consideration. Tax considerations should always come second to commercial considerations.
Tax Payments & Instalments
With an eye on your business cash flow, our team can assist you to prepare a tax calendar - a schedule of your group of entities tax payment due dates and amounts - so that your cash flow projections and budgets allow for these so that there are no nasty surprises when tax payments fall due. Please reach out to your advisor if this will benefit you.
Superannuation
Superannuation often forms the bedrock of tax planning strategies, given the tax effectiveness of assets held and income derived within a compliant superannuation environment.
Discussion with your trusted advisor is key to understanding your superannuation contribution caps and your eligibility to make these contributions.
Contribution caps for the 2021 year are as follows:
- Non-Concessional $100,000
- Concessional $25,000
Understanding the contributions that have been made by you or on your behalf are important when wishing to make contributions into your compliant superannuation fund prior to year-end.
You may also be eligible to utilise the bring forward rules to contribute up to 3 years worth of non-concessional contributions or take advantage of any catch up concessional contribution amounts.
Although the June 2021 quarter SGC does not have to be paid until 28 July 2021, tax deductions for the superannuation contributions will only be available in the 30 June 2021 tax year if the contribution is received by the superannuation fund by 30 June 2021, therefore businesses are encouraged to review their payroll obligations and pay any June quarter SGC with enough time for the funds to clear into the members superannuation account prior to 30 June 2021.
Small & Medium Businesses
From 1 July 2020, the small business turnover threshold has increased from $10 million to $50 million.
This means from 1 July 2020, small and medium businesses can access the concessional prepayment rules and the immediate deduction for start-up costs. If your aggregated turnover is less than $50 million, you may be able to claim eligible prepaid expenses if paid prior to 30 June 2021.
Plant & Equipment
In 2020 the government introduced measures to help businesses recover from the impacts of the coronavirus pandemic (COVID-19).
Eligible business may be able to claim the full cost of eligible depreciating assets in their 2021 tax return, provided they are installed and ready for use prior to 30 June 2021. To understand the deductibility of plant & equipment purchased for your business, you may read more here.
Review your fixed asset register and identify any equipment that is obsolete, scrapped or to otherwise be written off.
Income Received in Advance
Income received in advance may not be derived (and taxed) until the services are provided, therefore, please ensure any invoices raise or income generated that is a prepayment for services not yet rendered to be accounted for as a liability rather than income to ensure you are not taxed on this income in the 2021 year.
Delay recognition of taxable income until after 1 July where appropriate.
Gifts & Donations
Donate to deductible charities before 30 June 2021 and ensure the payment is to an endorsed deductible gift recipient (DGR).
Trade Debtors
Review your trade debtors schedule and write any bad debts prior to 30 June 2021 off to allow deductibility in the 2021 year.
Trading Stock
Identify any obsolete stock and ensure their written down value, if any, are recognised in your stock on hand report.
Car Expenses for Individuals
- If claiming actual expenses, check the logbook is current and that logbook details are correct.
- Ensure year-end odometer readings are taken.
- Ensure all relevant receipts have been kept.
Prepayments
If expenses are not subject to the prepayment rules, prepay deductible expenditure by 30 June 2021.
Expenses are generally deductible if incurred by 30 June 2021 if the benefit does not extend beyond 12 months.
Director and Employee Entitlements
Conduct shareholders’ meetings before 30 June 2021 to approve directors’ fees and bonuses to receive deductions for the 2020/2021 year.
Ensure arrangements for employee bonuses based on 2021 results are in place before 30 June 2021 to receive the deduction for the 2020/2021 year.
Sale of Investments – CGT Issues
- Where CGT assets will be realised for a gain, consider delaying making the contract for sale until after 30 June unless you have losses that may be lost because of the loss integrity measures.
- Timing of disposal under a contract for CGT purposes is generally the date of making the contract.
- If assets are held for less than 12 months by individuals, trusts or super funds that are eligible for the CGT discount, consider delaying sale until 12 months has passed.
Division 7A and Unpaid Present Entitlements
Ensure any minimum repayments of Division 7A loans are paid back to the company to avoid dividends having to be paid to shareholders in lieu of this repayment, which may cause unnecessary tax payable by those shareholders.
Where a company has received a distribution of trust income for the year, ensuring that the cash is transferred to that company to avoid the unpaid entitlement converting to a loan.
Should you have any queries in relation to the above please do not hesitate to contact your advisor to help you manage your end of year planning process.
Trustee Resolutions for Distribution of Trust Income
A key tax planning strategy involves the resolution to distribute Trust income to eligible beneficiaries, where the Trustee has, at its discretion, the ability to select which beneficiaries will be distributed Trust income and the amounts to which they will be entitled to (and taxed upon). If any eligible beneficiaries have turned 18 prior to 30th June 2021, there may be some significant tax advantages to be had by resolving to distribute to them and other low-income individual beneficiaries. Please ensure Trustees review their resolutions and execute to distribute in a tax effective manner.
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