Home / Business / Articles / Year end 2013/14 tax tips for Business

As we approach 30 June there may be some actions that can be done to realise the benefits of tax deductions sooner or to defer income to the next year. Here are some things to consider:

Prepay expenses
Remitting employee superannuation
Stock and consumables
Bad debts
Changes to SBE Concessions
Tax free minor benefits
Motor vehicle log books
Donations
Trusts
Record Keeping

Prepay expenses

Prepaying expenses before year end can be a way of reducing your current year tax liability. It can be particularly beneficial if you expect to be on a higher tax bracket this year compared with next year. If payments are due early next financial year, a pre-payment may entitle you to the tax benefit much earlier.

The rules differ depending on whether the taxpayer is an individual, small business entity (SBE) or other business entity. Broadly, an SBE is a business entity that has turnover of less than $2 million.

Individual taxpayers such as employees and investors can claim a deduction for a prepayment of up to 12 months of expenses. Typically, this includes subscriptions, memberships and interest paid on investment loans.

If prepaying interest, make sure your financial institution is aware of what you are doing. Otherwise the payment may be used to reduce the principal, which is not tax deductible.

Remitting employee superannuation

If an employer wishes to receive a tax deduction in the current year for superannuation contributions in respect of their employees, the cash will need to be contributed by 30 June. Make sure you allow yourself sufficient time to mail the cheques or attend to the contribution.

Also, the minimum employer superannuation guarantee rate of 9.25% for the period ended 30 June 2014 will increase to 9.50%, from 1 July 2014 onwards. The Government has announced the rate to remain at 9.5% until 30 June 2018 and then increase by 0.5 percentage points each year until it reaches 12%.

PAYG payment summaries for employees

Payment summaries should be provided to your employees by no later than 14 July.

The PAYG payment summary statements need to be lodged with the ATO by 14 August with the 'ATO original' payment summaries.

Reportable payments to contractors

There is a new reporting system for the building & construction industry for payments made to contractors.

Stock and consumables

ATO rules require that stock be physically counted at year end unless there is a perpetual stock record system. Stock take records should be retained as part of the business records. SBEs can be exempt from conducting a yearly stock take if the value of stock has moved by less than $5,000 during the year.

Businesses pay tax on the value of stock at the end of the financial year. It may be worthwhile to consider selling or disposing of slow moving stock, so that it is not counted in the year end stocktake. Similarly any obsolete assets on the business' balance sheet should be disposed of by year end. For example, old computer equipment, printers and similar items which may have been retained but have no further use in the business.

If you expect to purchase consumable items such as office supplies and cleaning products in the coming months, these items can be purchased before 30 June 2014. This will enable a tax deduction to be claimed in the 2014 financial year. Assets costing up to $6,500 purchased prior to 30 June are eligible for immediate write off in small business entities (see below).

Bad debts

Bad debts should be written off before year end to enable a tax deduction in the 2013 income year. The write-off entry must be processed in the ledger by 30 June. We recommend recording this in the minutes of the business.

Changes to SBE Concessions

If you conduct an SBE, the following changes to the simplified depreciation rules still apply to your business from 1 July 2013:
bulletAssets costing less than $6,500 are immediately tax deductible in the year the asset is purchased and used for business purposes, or installed and ready for business use.
bulletMotor vehicles purchased will be eligible for an initial tax deduction of $5,000, plus 15% of the remaining value.

Note: The Government has announced its intention to reduce the instant asset write-off threshold to $1,000 and remove the special depreciation rules for motor vehicles from 1 January 2014. However the bill has not been passed and the concession is still available for the 2014 financial year. As these concessions are unlikely to be available in 2015, small asset purchase and motor vehicles will give a larger deduction if purchased prior to 30 June 2014.

Reportable payments to contractors

There is a new reporting system for the building & construction industry for payments made to contractors.

Tax exempt minor benefits

Employers can provide minor and infrequent benefits, valued less than $300, to employees. Gift cards of less than $300 are tax exempt to the recipient, deductible and FBT free for the employer. If you want to give a yearend bonus, consider a gift card rather than a cash bonus.

Motor vehicle log books

To reduce your fringe benefits tax or to maximise your vehicle deductions, it is a good idea to keep a log book if you haven't kept one in the last 5 years. A log book must be maintained for a continuous 12 week period and is valid for 5 years. For example, if you have not maintained a log book since the 2009, you will need to start recording prior to 30 June 2014.

Donations

Businesses get a deduction for donations to deductible gift recipients. For companies (taxed at 30%) greater tax benefit will be obtained by the business owner making the donation personally if the business owner has income greater than $37,000. If you are planning to make a donation, consider making it before June 30 to get the deduction in the 2013 year.

Trusts

Trust distribution resolutions should be put in place by June 30. If you are considering making a distribution to a new beneficiary in 2014 you will need to report the tax file number to the ATO by 28 July. Also, if a distribution is to be made to a beneficiary who has turned 18 during the year, the tax file number of the beneficiary will need to be reported for the first time.

A trustee making a distribution to a charity needs to either pay or advise the distribution amount to the charity during the financial year, or no later than two months after the end of the financial year.  

Record Keeping

June 30 is a good time to reconcile the business' bank accounts and update your software for the next financial year. You may want to move to cloud accounting or to upgrade your existing software to a higher version. Also, June 30 is the best time to move from cash accounting to accrual accounting for GST purposes.

Peter Shields

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