Is your business considered a “small business?”
If the answer is yes, your business has access to a range of tax concessions from the Australian Taxation Office (ATO). In order to qualify, your business must have an aggregated turnover of less than $10 million and be operating a business for all or part of the 2020 year.
Here are the deductions…
1. Instant deductions for asset purchases.
If you business has a turnover under $500 million, any business assets purchased up to the amount of $150,000 (exc. GST) will be immediately deductible.
KPI recommends buying these assets and using them before 30 June 2020. For more information on the Coronavirus Economic Stimulus Package for businesses, read here.
2. Maximise Deductible Super Contributions.
The concessional superannuation cap for 2020 is $25,000 for all individuals. Do not go over this limit or you will pay more tax. Please not that employer super guarantee contributions are included in these caps. Where a concessional contribution is made that exceeds these limits, the excess amount is included in your assessable income and taxed at your marginal rate, please an excess concessional contributions charge.
For the contribution to be counted, it must be received by the Fund by 30 June 2020.
3. Bring forward expenses.
Purchase consumable items before 30 June 2020. These include marketing materials, consumables, stationary, printing, office and computer supplies. Spend the money now and get the deduction this year.
4. Tools of Trade (FBT Exempt Items).
The purchase of Tools of Trade and other FBT exempt items for business owners and employees can be a highly effective way to purchase equipment with a tax benefit.
Items that can be package include handheld/portable tools of trade, computer software, notebook computers, personal electronic organisers, digital cameras, briefcases, protective clothing, and mobile phones.
If structured correctly, the employer will be entitled to a tax deduction for the reimbursement payment to the employee (for the equipment cost), claim any GST input credit, and the employee’s salary package will only be reduced by the GST-exclusive cost of the items. Ensure that you buy these items before 30 June 2020.
5. Investment Property Depreciation.
If you own a rental property and haven’t already done so, arrange for the preparation of a Property Depreciation Report to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property.
6. Motor vehicle log-book.
Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2020. You should make a record of your odometer reading as at 30 June 2020 and keep all receipts/invoices for motor vehicle expenses.
An alternative (with no log book needed) is to simply claim up to 5,000 business kilometres (based on a reasonable estimate) using the cents per km method.
7. Repair & Maintenance Costs.
Make payments for repairs and maintenance (business, rental property, employment) before 30 June 2020.
8. Defer investment income & capital costs. If possible, arrange for the receipt of Investment Income (e.g. interest on Term Deposits) and the Contract Date for the sale of Capital Gains assets, to occur after 30 June 2020.
This is because the Contract Date is generally the key date for working out when a sale occurred, not the Settlement Date!
9. Pay Employee Superannuation Now.
To claim a tax deduction in the 2020 financial year, you need to ensure that your employee superannuation payments are received by the super fund or the Small Business Superannuation Clearing House (SBSCH) by 30 June 2020. You should avoid making last minute superannuation payments as processing delays may cause them to be received after year-end.
10. Defer income.
If possible, defer issuing further invoices and receiving cash/debtor payments until after 30 June 2020. This strategy pushes tax payable to future years.
11. Year-end stocktake.
If applicable, you need to prepare a detailed Stock Take and/or Work in Progress listing as at 30 June 2020. Review your listing and write-off any obsolete or worthless stock items.
Talk to us about your different options for valuing Stock, and how they affect your tax payable.
13. Write-off bad debts.
Review your Trade Debtors listing and write-off all bad debts before 30 June 2020. Prepare a management meeting document listing each bad debt, as evidence that these amounts were written off prior to year-end and enter these into your accounting system before 30 June 2020.
14. Small business concessions – Prepayments.
“Small Business Concession” taxpayers can make prepayments (up to 12 months) on expenses (e.g. loan interest, rent, subscriptions) before 30 June 2020 and obtain a full tax deduction in the 2020 financial year.
15. Trustee resolutions.
Ensure that the Trustee Resolutions are prepared and signed BEFORE 30 June 2020 for all Discretionary (“Family”) Trusts. Please see us for more information about these resolutions.
How KPI Business Advisory can help you Do you want to minimise your business tax? Book in your initial complimentary meeting with our taxation advisor here or give us a call on 1300 001 132. Disclaimer: This is simply general advice by KPI and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this guide, you should seek professional advice at KPI.