3. Consider delaying buying energy-saving assets
You might want to wait until after July 1 if you’re thinking about buying an energy-saving asset. After then, a bonus 20 per cent deduction kicks up to a $100,000 asset cap for each business.
“There’s very little detail right now, but this incentive is likely to include things like energy-efficient fridges, induction cooktops, heat pumps, electric heating and cooling systems, and batteries,” says Raftery.
Things like electric vehicles, capital works and assets not connected to the electricity grid that use fossil fuels are likely to be excluded.
Don’t forget the interest may be tax deductible if you’re borrowing to buy a business asset. But it’s always prudent to get the right advice before you take this step.
4. Make the most of concessional contribution caps
As we head towards tax time, business owners and their family members can consider making the maximum annual concessional super contribution of $27,500.
“This may involve topping up employer contributions paid through the business with personal contributions into the individual’s super account,” says Bembrick.
For those with $500,000 in super, there’s an option to make catch-up contributions for any portion of the contributions cap that has not been used over the previous five years.
“Also, don’t forget you can pay an after-tax spouse contribution of up to $3000, where they are not working or have a low income. But be aware of the additional 15 per cent surcharge applied to super contributions made by or on behalf of taxpayers,” he warns.
5. Make good strategic decisions
There are lots of loose ends to tie up at tax time. For instance, where companies have made loans to shareholders, associated individuals or trusts, be sure to consider the implications of the Division 7A deemed dividend rules.
“This should include whether it is possible and desirable to repay the loan balance in full, put in place a written loan agreement or make the minimum repayments under an existing loan arrangement,” says Bembrick.
“Small business should also consider the need or desirability to declare dividends before year-end. Review the tax position of each affected shareholder to understand the likely tax payable on the dividend. Plus, ensure the company has sufficient franking credits to pay a fully franked dividend and ensure that the appropriate documentation is prepared and executed in a timely manner,” he says.
Consider the desired allocation of income between different beneficiaries if you have discretionary trusts, either as the business operating entity or as the shareholder of an operating company. Appropriately document the trustee’s determination, with reference to the specific terms of the trust deed. Bembrick says this is an area of focus for the ATO.
“Importantly, take the opportunity to review the current business structure and consider whether it may be worthwhile looking at alternative structures, using the extremely valuable small business capital gains tax concessions to facilitate a tax-effective restructure. This can be especially important in the context of business succession or future exit planning,” he notes.
Other common year-end planning considerations include writing off bad debts, reviewing trading stock valuations and writing off obsolete, depreciating assets.
It’s always a busy time of year, so now’s the time to get your tax ducks in a row to make sure you’re making all the allowable deductions you can.
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