Year End Tax Planning Strategies

Monday, 20 May 2013    Tax,Business Growth

Business Income and Expenses

Subject to cash flow requirements consider deferring income until after 30 June, especially if you expect lower income for 2013/14 compared to 2012/13.

Most businesses are taxed on income when it is invoiced. Some small businesses may be taxed only when the income is received. 

Ensure you have complied with the requirements to claim deductions in 2012/13:

  • Bad Debts must be written off in your accounts before 30 June.
  • Employer and or self-employed superannuation contributions must be paid to and received by, the super fund before 30 June and must be within the contributions cap.
  • Depreciation can be claimed for assets first used or installed ready for use, by 30 June.
  • Small businesses (turnover less than $2 million) can claim expenses prepaid up to 12 months in advance.
  • Wages paid to your spouse or family members must be reasonable for the work performed.

Small businesses planning major purchases or replacements of capital equipment should contact us for advice.  Careful timing of those transactions can result in substantial tax savings. Items costing less than $6500 excluding GST are now immediately deductible (up from $1000). Motor vehicles costing $6500 or more qualify for an upfront deduction of $5000 plus 15% of the remaining amount. If you are in the market for a new car, it may pay to consider this before 30 June.

Personal Income, Deductions and Tax Offsets

Subject to cash flow requirements, set term deposits to mature after 1 July rather than before 30 June.

Consider realising capital losses if you have already realised capital gains on other assets during 2012/13.

If you expect lower income in 2013/14 due to retirement or any other reason, consider deferring income until after 1 July, when you will be in a lower tax bracket. If you are a primary producer and you expect a permanent reduction in income, consider withdrawing from the income averaging system.

Where possible, arrange for substantial out-of-pocket medical expenses to be grouped in the same financial year and for all expenses to be invoiced in the name of the higher income earner.

Arrange for deductible donations to be grouped in the higher income year and make all donations in the name of the higher income earner.

The tax free threshold for 2012/13 for Australian resident individuals in $18,200 (up from $6,000). When combined with the Low Income Tax Offset, residents pay no tax on incomes below $20,542. Higher thresholds apply to senior Australians and pensioners. For incomes above the thresholds, tax rates are slightly lower.

Tiered rates of private health insurance rebates now apply, based on your age and income. If you don't hold private health insurance, tiered rates of Medicare Levy surcharge apply based on your income.