16 end-of-year tax planning tips for business owners

Although the financial year end is soon, it’s still not too late to take action to put your business in the best possible shape tax-wise.

Here’s a list of 16 things business owners can consider.

Companies

1. Avoid owing money to the company. If you have taken more money out than what you have declared as a wage or dividend, the accounts will show this as a loan. You will have to repay this money over 7 years with principal and interest payments. The company will declare this interest as income and pay tax on it.

Typically, the loan will be repaid by declaring dividends that will be taxed as income in your personal tax return. This can create big tax bills if the amounts you have taken out but not declared are large.

Owing money to the company can cause significant personal tax problems. Make every effort to avoid it.

2. Make sure you pay yourself a wage to reflect your work and help offset any drawings that you have taken, so that you can avoid owing money to the company. There’s no personal tax for up to approximately $20k of income.

Trusts

3. Ensure you sign trust distribution minutes prior to 30 June.

4. If you have made significant profits, consider distributing profits to a company so that these distributions have tax capped at the 27.5% rate (the company must have business operations to qualify for the reduced company tax rate). The distribution must be actually made rather than merely being paper entries.

Please note that there will be implications with having funds in the company as these funds can not simply be put back in the trust, they will have to be loaned back. They also can’t be taken as drawings without tax implications (see point 1 above).

Superannuation

5. Maximising your superannuation contributions can save you tax, as contributions are taxed at 15% as opposed to higher personal marginal tax rates after you earn more than $18,200.

6. Ensure your superannuation contributions that you want to claim as a tax deduction are no greater than $25,000. The $25,000 is the total of all superannuation contributions to all of your funds, including employer 9.5% superannuation on any wages you have received.

7. Pay all staff superannuation prior to 30 June as unpaid superannuation is not deductible.

Creditors and Expenses

8. If your tax return is on a ‘cash’ basis rather than an ‘accruals’, or invoice basis, ensure as many creditors are paid as possible prior to 30 June as these payments will reduce your business’s profit and tax.

9. If your tax return is on an accruals or invoice basis, ensure as many as possible supplier invoices are dated prior to 30 June.

10. Consider bringing forward any planned maintenance to before 30 June so you can claim this expense in the current tax year.

11. Consider taking advantage of the $20,000 instant asset write-off prior to 30 June for purchases of plant and equipment.

12. Scrap obsolete items

Debtors and Sales

13. Ensure you don’t invoice for work that has not been completed prior to 30 June.

14. Review your debtors and consider whether any can be written off

Prior Period Losses

15. Review prior period tax returns to ascertain if there are prior year income losses and if so, ensure these are claimed against any income made this year.

16. If you have prior year capital losses, ascertain whether any planned asset sales should be processed prior to 30 June so that any capital gains from these sales can be offset against prior year capital losses.

This list will hopefully help you save some tax in 2018. Good luck with your tax planning and please let me know if you have any queries.

Liability limited by a scheme approved under professional standards legislation