2018 Tax tips for Small Business
You have worked hard all year and now it is time to get your fair share in return. Now is the time to take some sensible steps to set you and your family up for the best possible return in 2018.
Take some time to consider these options this tax season:
Maximise Depreciation deductions - Small Business with an aggregated annual turnover of less than $10 million can still get an immediate tax deduction for nearly all individual assets purchased by 30 June 2018 that cost less than $20,000. Such assets must be used by the business for an income-producing purpose and they must be installed ready for use by 30 June 2018.
For businesses registered for GST, the $20,000 threshold is calculated on a GST-exclusive basis, but for businesses not registered for GST, the threshold is calculated on a GST-inclusive basis.
Pay extra into your super fund - Super is a great way to save for your retirement, but it also offers great tax efficiency. As previously mentioned in Tony's Blog 'Super Opportunity for tax savings' this opportunity is now available for more people regardless of whether you are self employed or an employee, but your payment must hit your fund before 30 June 2018.
Add extra to your spouse's super fund - A spouse can claim an offset up to a maximum of $540 for contributions to their spouses's eligible super fund if if the total of the spouse's assessable income, total reportable fringe benefits and reportable employer super contributions is under $37,000.
Make trust resolutions by 30 June - As always, trustees of discretionary trusts are required to make and document (through minutes, file notes or exchange of correspondence) resolutions on how trust income should be distributed to beneficiaries for the 2017-18 financial year by 30 June.
Seek professional advice when starting a business - Professional expenses associated with starting a new business, such as legal and accounting fees, are deductible in the financial year those expenses are incurred rather than deductible over a five-year period as was the case previously.
Consider whether your legal structure is right for your business - Small businesses are able to change their legal structure without incurring any income tax liability when active assets are transferred by one entity to another. This rollover applies to active assets that are CGT assets, trading stock, revenue assets and depreciating assets used, or held ready for use, in the course of carrying on a business. However, caution must be exercised. Business restructuring is complex, so please seek advice first.
Document the streaming of trust capital gains and franked dividends to beneficiaries - Broadly speaking, trustees of discretionary trusts can stream capital gains and franked dividends to different beneficiaries if the trust deed allows the trustee to make a beneficiary "specifically entitled" to those amounts. The trustee must document this resolution before 30 June and the beneficiary receives or is entitled to receive an amount equal to the net financial benefit of that gain or dividend. These streaming rules are complex and taxpayers should seek advice first.
Pay any outstanding superannuation entitlements - as previously mentioned in Lionel's blog 'Super Guarantee 12 month amnesty', the Australian Government has announced a 12-month amnesty from 24 May 2018 for employers to pay any outstanding Superannuation Guarantee (SG) contributions for periods prior to 1 April 2018. Employers who voluntarily disclose and pay previously undeclared SG shortfalls during the Amnesty and before an SG audit will not be liable for the administration penalties and will be able to claim a tax deduction for payments made during the 12-month period. The announcement is subject to approval by the Parliament.
Seek independent advice on investment products promoted as being tax effective - at this time of year you are bombarded with adverts for End of Financial Year Sales, pushing their purchase as being tax effective. Don't take tax advice from a Car Salesman, Equipment finance officers, Property Developers or work colleagues as fact - it is always prudent to get a second opinion from someone who knows your situation.
For primary producers:
Farm Management deposits - One of the best tax-planning measures available to primary producers is effectively utilising the farm management deposits scheme, or FMDs. They are an effective business and cash flow planning tool. Primary producers can deposit up to $800,000 in a FMD account, they can have early access to their FMD account during times of drought, and they may be able to offset the interest costs on primary production business debt.
Income averaging - Tax averaging enables primary producers to even out their income and tax payable over a maximum of five years to allow for good and bad years. This ensures that farmers don't pay more tax over time than taxpayers on comparable but steady incomes.
Other tax specific tax concessions for primary producers - Also, don't forget to consider the uncapped immediate write-off for capital expenditure on water facilities and fencing assets and the outright deduction for Landcare operations.
For more info on the above please read further on Lionel's blog about 'Tax concessions for SBE's and Primary Producers' or contact Lionel and Tony for more detailed information.
Keeping track of expenses has never been more important or easier to do
Keeping records is vital for maximising your tax return but can also be messy. Not only do you need them to make your claims but you're also required to maintain the records for 5 years after lodging your return.
If you use your phone, home internet or vehicle for work purposes you are entitled to a deduction. The ATO has a lot of conditions that need to be met to make a genuine deduction claim, but importantly you also need to be able to substantiate your claim with records showing how much you use it for work versus personal use. You must be able to produce receipts and bills as evidence of your expenses.
Substantiation will be a key focus area for the ATO when assessing tax payers returns in 2018.
"It's important that you have a record of the expense and can demonstrate how you calculated your claims. Every year we disallow lots of claims because there is no evidence to prove the expense. Yet it's so easy to keep an electronic record," ATO assistant commissioner Kath Anderson said.
The ATO is warning taxpayers they will be paying close attention to claims for 'other' work-related expenses this year, and is reminding people to keep appropriate records.
For an expense to be deductible they must meet the three golden rules:
1. you must have paid for it and not been reimbursed,
2. it must be directly related to earning your income and not a private expense, and
3. you must have a record to prove it. This evidence can be a receipt, a bank statement or a diary record.
To make tax time easier, taxpayers can use tools such as the WALSH ACCOUNTING app to save and store accurate information about their deductions during the income year, which they can then use when tax time rolls around. You can then upload to Walsh Accounting or provide to your tax agent.
Simple, easy and efficient receipt management
Managing your receipts can be a tough task. Trying to keep track of all those important business expenses and receipts can be a nightmare: dockets fade, pockets overflow, wallets become crammed with them and inevitably, many are lost. If you are claiming back expenses and/or the GST then this can be of significant cost and frustration.
Over the years, as a firm of proactive accountants, we have seen it all. From envelopes and shoeboxes overflowing with receipts to carrier bags and plastic wallets.
There is a much easier way and it's free!
As a modern, forward thinking firm we are always looking for new and improved ways of doing things. So when we launched our Apple and Android-Approved App, one of the important features was Receipt Management - A super easy way that all businesses (both clients and non-clients) could store and manage their receipts. And here it is, the Walsh Accounting Receipt Manager.
It's built into the App, which is available free from either, the Apple or Android store. Click here to download now or Simply search for MyAccountants in the relevant store and download the App free using our unique code WALSH02060.
Our app icon looks like this.
You can get your free App using the QR codes below or visit our website.
DOWNLOAD CODE: WALSH02060
In addition, our web practice offers you interactive services.
You can keep up to date with important accounting and business dates and deadlines. More...
The Tax Facts section where you can learn more about tax requirements within Australia. More...
Try out our new online calculators.More...
Perhaps you run out of time during normal business hours to call us for an appointment...why not schedule an appointment using our special online form? You can access this form any time of the day or night and with the easy to follow instructions, you'll find it a quick and simple way to request an appointment time. Click here to book an appointment.
As we respond to feedback from you and our other clients, we will continue to add further information and interactive services to our website.
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Lionel and Tony will be regularly blogging about issues, important and otherwise. Please check out Lionel's recent blog on proposed changes to the law which will deny deductions relating to vacant land for loan interest, rates and other holding costs from 1 July 2019.
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If you have any questions, comments, suggestions, please don't hesitate to contact us at any time. We look forward to hearing from you.