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Tax Planning 2018 - Small Business

Its time to get organised and plan the final stretch for 2018. We always say have all your tax minimisation strategies in place by the end of May for June 30.

Small Business Entity

For 2018 the tax office definition of a small business is one that has an aggregated turnover of less than $25m.

Companies under this turnover attract a tax rate of 27.5%.

Although this is the case there are still a number of exceptions in this area as to what can be claimed at various levels of turnover from $2m to $10m.

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Note the following key areas to consider as part of your June 30 tax planning Arsenal:

Turnover Less than $2m with assets less than $6m

  • Ensure, if selling your business, that you have planned how you intend to take advantage of the small business CGT concessions before 30 June.

  • If you run your business from your dedicated home office, you may be able to claim interest and depreciation on your home without any Capital Gains Tax (CGT) consequences. You need to plan your options in advance to avoid potential CGT issues.

Turnover Less than $10m

  • For the 2018 fiscal year the small business offset is 8% with a limit of $1,000. If running a company, consider realising enough profit to take advantage of the offset.

The tax offset increases to 10% in 2024–25, to 13% in 2025–26 and to 16% from the 2026–27 income year.

  • Equipment purchased with a value less than $20,000 (ex GST) attracts an immediate deduction in 2018 as opposed to being depreciated. Note that this has been extended to 30 June 2018 only and may revert back to $1000 1st of July 2018. So if business equipment is needed, it might be worth bringing forward purchases prior June 30 due to the tax savings.

  • Purchasing a new piece of equipment (i.e motor vehicle)? Buy before 30 June 2018 and get 15% depreciation on the entire value with 30% in fiscal 2018.

  • Providing car parking “on premise” as an employee benefit is FBT exempt while still tax deductible. If you have vacant spaces, consider salary packaging in place of increasing wages.

Turnover Less than $25m

  • If a prepayment of 2019 expenses satisfies the “12 Month Rule”, pay before June 30 2018 to receive a full deduction. Examples could be:

  • Office Rent

  • Equipment leases

  • Interest payments

  • Business trips planned after June 30 2018.

  • Training Courses.

  • Write off Bad Debts.

  • Bring forward maintenance & repairs.

  • Ensure your super contributions are paid before 30 June (They must be received by the fund to be tax deductible).

  • Review your asset register and claim any items no longer in use and not yet fully depreciated.

  • Meet bonus and commission obligations by passing a resolution to approve the payment (payment not required for immediate deduction), applies to companies & trusts only.

  • Remember to instigate a stock take if applicable. Ask if unsure.

  • If you are registered for GST, equipment purchases made before 30 June can claim a GST refund in your June BAS return. This is a great way to front load a cash injection.

  • Manage timing of a CGT event, tax on capital gains is applied to contract date not settlement. If possible manage the contract date to 1 July 2018 if this improves your tax position.

  • Ensure that any loans to shareholders for companies are covered by a valid Div 7a compliant loan agreements and is being repaid in the appropriate manner. If not sure please ask.

Final Notes

Although tax laws are complex and constantly changing, there are always opportunities to legitimately minimise your tax liability. To discuss your individual circumstances or concerns, and to have a tailored plan designed to meet your personal circumstances, book a meeting early.

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