Tax Planning Edition
Everyone likes to save tax, but when trying to get last minute transactions completed before 30 June you need to be clever about what you are doing, make sure you tick all the boxes so you can claim your deductions, and more importantly make sure you are doing things for the right reasons for your finances and business, rather than just to get a tax deduction.
Inside this edition we look at some tax tips for 30 June 2013, but these strategies can also be implemented to give you a head start into the 2014 financial year (i.e. from 1 July 2013).
If you have not reviewed your tax positon for the 2013 financial year, or have any questions in relation to any of the material in this newsletter, contact Value Beyond to discuss further.
Have You Seen Your Business Scorecard?
Tax Planning – It’s Not All About Tax!
Tax Tips For 30 June 2013 And Beyond
HECS Indexation And Repayment Bonus
Have You Seen Your Business Scorecard?
Leading up to 30 June 2013, as part of the process of reviewing your financial performance to generate tax estimates, Value Beyond has also launched the Business Scorecard.
The Business Scorecard provides a one page overview of your business’ profit performance, as well as an analysis of the cash flow of your business.
The Business Scorecard provides a tangible connection between our books How To Read Financial Statements and Where Did The Cash Go?, and your business’ performance. This helps you to get a better understanding of how much money you earn, as well as where it is spent.
If you would like to see your Business Scorecard, contact Value Beyond to make a time for a meeting for your year-end tax planning and we will present the Business Scorecard at that meeting.
Tax Planning – It’s Not All About Tax!
It’s called tax planning – how could it not be all about tax?!
While saving tax can be an important part of being able to fund further business growth, or fuel your personal savings and investment plans for financial retirement, sometimes spending $1 to save $0.40 in tax is not the smartest option.
Along with the tips provided in this newsletter, there are also other issues such as your operating/investment structure, improving your profit and cash flow, and ensuring that you protect your assets that could have as significant an impact on your wealth as saving a few dollars in tax.
So, while the fast approaching deadline of 30 June provides us with a reason to review our tax position, it is also a good time to review the overall strategy and to review all the factors that lead to success. By doing this, you can ensure you achieve all of your goals in an efficient and effective manner.
Tax Tips For 30 June 2013 And Beyond
One key detail to remember if undertaking any tax planning strategies is that 30 June 2013 is on a Sunday this year – this means that any transaction must be completed by this date, or in some cases will need to be finalised by Friday 28 June 2013. This is particularly true of making a superannuation contribution, as the funds must be received by the superannuation fund before 30 June 2013 to be eligible for a deduction. Ensure you allow enough time for the transfer of funds to be processed by the banks so that the fund can record your deduction in the 2013 financial year.
The overall strategy for saving on tax before 30 June is very similar to the strategy employed for improving cash flow – delay tax expense and bring forward tax savings.
This can be achieved by deferring income and bringing forward deductions.
DEFERRING INCOME
Delay invoicing or receipts
If you are in business, deferring income can be as simple as delaying issuing an invoice to a customer, or delaying collection of payment until 1 July 2013.
Defer dividends and interest income
If you have shares in a private company, you might consider paying a dividend from 1 July onwards to ensure that the income is recorded in the following financial year.
Do a stocktake
If you have stock, then doing an accurate stocktake may result in a lower closing stock figure than the previous year. This in turn will increase expenses and reduce your overall income.
Delay contract date for selling assets
If you are considering selling an asset, the date of the contract is the relevant date for Capital Gains Tax (CGT). By signing a contract after 30 June 2013 you can defer the capital gain to the following financial year.
Keep in mind that this is not the only thing to consider though – holding onto shares for an additional few days may cost you more than the tax if the prices were to fall.
Salary sacrifice for work related items
By purchasing work related items through salary sacrifice you may be able to effectively receive a 100% deduction for items that you would otherwise have to depreciate in your own tax return. Such items include laptops and portable computing equipment, mobile phones and other portable work items. Talk with your employer to determine whether they provide salary sacrificing arrangements to cover these items.
BRINGING FORWARD DEDUCTIONS
There are a number of ways in which deductions can be brought forward. These include simply buying items that qualify as allowable deductions.
Reviewing bad debts
If you have any long outstanding debtors, consider declaring them bad debts. This does not mean the customer doesn’t have to pay you – it is merely a recognition that you don’t think you will get paid. This will entitle you to claim a deduction, as well as make a GST adjustment on the 30 June BAS.
Declaring staff bonuses
Bonuses to staff are allowable deductions when they are declared as due and payable, and the staff and amounts are clearly identifiable. If you have been considering bonuses and can determine the eligible staff and final amounts by 30 June, then you may be entitled to the deduction even though the bonus may not be paid until early July.
Prepaying expenses
Certain taxpayers can claim up to 12 months of expenses if they are paid in advance i.e. before 30 June 2013. Examples of expenses that could be prepaid include interest on a loan for property or shares, prepaying subscriptions for the following year, or prepaying any expense that will cover the next 12 months.
Buying depreciable assets
Businesses with turnover less than $2 million can claim an immediate deduction for the purchase of assets that cost up to $6,500. If you have any assets that you have been planning to purchase, then doing so before 30 June can generate an even better return on your investment.
Spending on expenses
Examples include paying for registrations for which notices have been issued, buying small items such as stationery, work related items and making tax-deductible donations to charities.
Make superannuation contributions
While Superannuation Guarantee contributions are not due until 28 July, you are not able to claim a deduction until they are physically paid to the fund. If the contributions are made before 30 June 2013 (must be received by fund by 28 June 2013), then you will be able to claim a deduction for the contributions.
If you are self-employed or run your own business, then consider making a contribution up to your $25,000 contribution limit (if you have not already done so). Again the contributions must be received by the fund by 28 June 2013.
HELP Indexation And Repayment Bonus
The ATO have announced that the indexation rate on Higher Education Loan Program (HELP) debts is 2.0% for the 2013 year.
Due to changes announced in the 2012 Federal Budget, the voluntary repayment bonus will end on 1 January 2014.
A strategy that we have implemented for a number of clients is to repay your HELP debt just before lodging your 2013 tax return to get the voluntary repayment bonus, and then get extra money back in your refund equivalent to the amount that would have otherwise gone towards a HELP repayment.
If you have any questions about this strategy, or think it may be suitable for you, please contact us at Value Beyond to discuss.
Online Scams On The Rise
The ATO has reported that the number of online scams is on the rise.
There were 10,972 reports of email scams in the period January to March 2013, which is a threefold increase from 3,558 in the period January to March 2012.
In the words of ATO Second Comissioner Geoff Leeper:
“Scammers can use your personal details to steal your identity and commit fraud such as taking out a bank loan or lodging fake tax returns in your name,” Mr Leeper said.
“I urge people to be vigilant – be wary of unsolicited emails or phone calls claiming to be from the ATO.”
“We will never send an email requesting you to confirm, update or disclose confidential details like your name, date of birth, address, passwords, or credit card details.”
Be aware!
If you ever receive an email that looks suspicious or promises you a refund, report it to the ATO or contact Value Beyond to confirm any amounts owing from the ATO.
PAYG Instalments Changing
The government has recently proposed changes to the Pay As You Go (PAYG) income tax instalment system that will require corporate tax entities to make PAYG income tax instalments monthly, rather than quarterly.
The government will now extend the requirement to make monthly PAYG income tax instalments to include all large entities in the PAYG instalments system, including trusts, superannuation funds, sole traders, and large investors.
To provide non-corporate entities with adequate time to prepare, the changes will be progressively brought in.
The specific timing is:
- corporate tax entities with turnover of more than $1 billion will still move to monthly PAYG instalments from 1 January 2014
- corporate tax entities with turnover of $100 million or more will still move to monthly PAYG instalments from 1 January 2015
- corporate tax entities with turnover of $20 million or more, and all other entities in the PAYG instalments system with turnover of $1 billion or more, will move to monthly PAYG instalments from 1 January 2016
- all other entities in the PAYG instalments system with a turnover of $20 million or more will move to monthly PAYG instalments from 1 January 2017.
This change is not yet law, and the government will continue to consult on the implementation of this measure.