Personal and Business Tax planning has never been more pertinent than currently with the impact of COVID-19. The last thing you need during these times is that you are required to pay more tax than what is legally required. Being halfway through the 2021 Financial Year, it is a good time to get on top of your tax planning strategies. It should be before the end of the financial year on 30th June 2021.
Maximise contributions to your own superannuation each year (for both you and your spouse). This is the best tax planning available. You are essentially getting a tax deduction for investing in your own future. Most people can claim a deduction for personal contributions they make into their super account up to your contribution cap. You are free to make a personal contribution at any time during the year. And claim a tax deduction in your tax return. This can be useful towards the end of the financial year if you have not reached your concessional contributions cap of a total of $25,000.
Carrying forward your concessional contributions cap (for low balance members)
The super rules were changed to allow low balance members (under $500,000) to use any of their unused concessional contributions cap on a rolling basis for five years. This means if you do not use the full amount of your concessional contributions cap in a particular year, you can carry-forward the unused amount and take advantage of it up to five years later. Any amount not used after five years expires.
This means you may be entitled to make additional deductible contributions. And above $25,000 this year to catch-up any missed contribution amounts in prior years to boost your super balance and potentially reduce tax.
As an employer, the super contributions are deductible for the year the superannuation fund receives them. So, paying your staff’s superannuation into their fund so it is there prior to 30 June ensures your business will receive a tax deduction in this year.
Instant Asset Write-Off
Under instant asset write-off eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used or installed ready for use.
Instant asset write-off can be used for:
- multiple assets if the cost of each individual asset is less than the relevant threshold
- new and second-hand assets.
When purchasing new assets to access the instant asset write-off, there are several dates and thresholds to you are required to consider now with the new laws being passed:
|Aggregated Turnover||Date range for when asset was first used or installed ready for use||Threshold per asset|
|< $500 million aggregated turnover||12th March 2020 to 31st December 2020||$150,000|
|< $50 million aggregated turnover||2nd April 2019 to 11th March 2020||$30,000|
|< $10 million aggregated turnover||29th January 2019 to 2nd April 2019||$25,000|
Limits – Motor vehicles
If you purchase a car (a passenger vehicle, except a motorcycle or similar vehicle, designed to carry a load less than one tonne and fewer than nine passengers) for your business, the instant asset write-off is limited to the business portion of the car limit of $59,136 for the 2021–21 income tax year. You cannot claim the excess cost of the car under any other depreciation rules.
As a business it a good idea to check all the people who owe you money before the end of the financial year. If the debt is not able to be recovered it should be written off as bad debt on or before 30 June. Be realistic, if they have not paid before COVID-19 it is unlikely they are in a better position now. Write it off.
If you are a Business with inventory, ensure a stocktake is done on the 30th June. Your inventory can be valued at market value, cost, or replacement value. Usually whichever is lower. The different valuations can make a significant difference to your tax outcome. All you need to do is complete the stocktake, and we will advise on the best valuation method for tax treatment.
Consider bringing forward your expenditure. Look at your cashflow. You could bring costs forward into this year and reduce tax payable.
Interest deductions for prepaid interest are generally available for interest expenses associated with investment income (as well as some other eligible expenses).
If you are a small business with an aggregated turnover of less than $10 million per year, then prepaid expenditure may be immediately deductible under the 12-month rule. This rule can generally be applied to deductible expenses such as Rent, Insurance, Lease Payments, Interest, and other business expenditure.
If you are struggling with your business tax planning for the coming financial year, it is never too late (or early) to start planning for your future. We are experienced in assisting you with all your tax planning requirements to ensure you pay no more tax than what is required. If you would like to discuss further or need help, please contact us and one of our Accountants will be in touch with you shortly.