TAX YEAR END – 30 JUNE 2020
The third and final article in our series on Tax Health Check for Businesses covers Tax Deductions.
Tax Strategies to Preserve Your Tax Deductions
|TAX ITEM||EXPLANATION||AAG TEAM|
|If you are a small business (group-wide turnover of less than $10 million), you may be entitled to an immediate deduction for certain prepaid expenses where the goods or services will be provided within 12 months from the date of expenditure. Examples of items that may be deductible under the 12-month rule include subscriptions and prepayments of interest on a loan used for income producing purposes.||Finance|
|Prepay Income Protection Insurance Premiums||Depending on your situation, you may want to consider pre-paying your Income Protection insurance. Income Protection insurance premiums are generally tax deductible as they are protecting your income for the future.
You may want to pay your premiums for your Income Protection insurance for 12 months in advance, so you can:
|Review your stock on hand and identify any obsolete stock. You should conduct a detailed physical stock take of all stock on 30 June. Retain your detailed stock sheets as part of your taxation records.||Investments
|Bad Debts||Bad debts are only deductible in the year they are written-off, it is therefore important that you review your receivables coming up to the end of the financial year to see what invoices (if any) should be written-off as unrecoverable. You will also need to factor in any GST adjustments that need to made as a result of writing-off debt.||Investments
|Deferring Income||The ability of a business to defer income will depend on each business, cash flows and the type of income derived. However, with the corporate tax rate reducing to 26% (from 27.5%) for certain companies (group-wide turnover of less than $50 million) in the 2021 financial year, it may be appropriate to defer income until the 2021 financial year where possible.||Consulting|
|Trust Resolution||Trustees of discretionary and family trusts must make valid distribution Resolutions before 30 June to effectively distribute trust income to eligible beneficiaries.
The Resolutions must be made in accordance with the Trust Deed and comply with your Trustee obligations. If you have not made a valid distribution by 30 June 2020, the Trustee may be liable to pay tax on the trust’s taxable income at the highest marginal tax rate.
|Franking and Dividends||If you are planning on paying any dividends in your company prior to the financial year-end, it is important to ensure that you have met the documentation/notification requirements. In addition, ensure your Franking Account is up to date as many businesses would have claimed refunds of their PAYG income tax instalments over the last few COVID-19 affected months. It is imperative that you have sufficient Franking Credits to avoid paying Franking Deficits Tax at a later date.||Consulting|
Please email us at firstname.lastname@example.org if you have any queries.
We will be in touch again in the new financial year to discuss your specific requirements for your tax return and to help you to maximise your claims.
We look forward to assisting you with your tax returns.