Want to Save Tax Now? Let Us Give You Direction. The 2018 Budget has pushed most of the proposed tax benefits to 2023 and 2025 financial years. How do you save tax now? Do the following Options Apply to You?
- Making Personal Super Deductions is a great way to Save Tax! Most people will save between 19.5% to 34% of tax by making super contributions and this is now available for both business owners and employees. The downside is you lock the funds away until retirement but you can save a good amount of tax and you can manage your super benefits for retirement. Be mindful to stay under the cap of $25,000 for deductible (concessional) contributions. The contribution needs to be received by your super fund by 30 June and then you complete an intention to claim a deduction form and lodge it with your fund. They then give you an acknowledge form that you need to hold to claim a deduction in your tax return. If you have any spare cash you may want to seriously consider this great option.
- Paying expenses before 30 June. Most business or work related deductions that are paid prior to 30 June are deductible in the year paid and you can then claim the deduction this year. This can include making the following payments before 30 June:
- Employee’s super guarantee and super payments for directors (Needs to be received by the super fund before 30 June to claim the tax deduction)
- Wages, Bonuses, Allowances and Employee entitlements
- Contractor Payments
- Trade Creditors Payments
- Travel and Accommodation Expenses
- Printing, Stationery, Stamps and Other Office Expenses
- Utility Expenses of Electricity and Telephone
The payment of these expenses early are meant to be a timing issue of expenses that you will need to pay in the short term but are paying them early to claim a tax benefit. If you don’t need these items and they are not going to benefit your business, then it is probably best not to purchase the items.
- Donations to DGR Charities. You can make donations to Charities that are Deductible Gift Recipients before 30 June to claim the donations as tax deductions.
- Purchase Capital Assets. Great news that the $20,000 asset write off for businesses purchasing assets has been extended to 30 June 2019 but you can still benefit from this now by purchasing assets costing less than $20,000 before 30 June 2018 and claim a full tax deduction this year under the small business entity rules. To be eligible, you need to:
- Run a business with a turnover under $10 million dollars.
- Cost or business use proportion of asset must be under $20,000 excluding GST.
- The asset must be installed and ready for use by 30 June.
- Deductible amount is limited to the business proportion of the cost of the asset.
Small Business Assets purchased exceeding $20,000 will be depreciated at 15% for the first year and 30% for subsequent years. For business not eligible as small business entities, assets under $300 are fully deducted and assets costing more than $300 are depreciated at specific depreciation rates for each asset.
- Hold back on receiving income until 1 July. For businesses on a cash basis, income is taxed when received so if you defer receipt to 1 July, it will be taxed in the new financial year. For businesses on an accrual basis, income is taxable when invoiced so your business would need to defer raising the invoice to 1 July to defer this income being taxable. You need to know on which basis you account for income being either the cash or accrual basis and look at your cash position to assess whether deferring the receipt or invoicing of income is viable.
- Rental Property Deductions. If you own a rental property under 40 years old, make sure you have obtained a Quantity Surveyor’s report to claim your Division 43 Building Write Off deductions now. This can provide big tax benefits for middle and high income earners. Please download our Rental Property Checklist and Worksheet at https://mohrsolutions.com.au/individual/
- Sale of Assets for Capital Gains/Losses. For Capital Gains Tax (CGT) purposes, the contract date determines the Financial Year in which the Capital Gain or Loss is assessed. The net taxable Capital Gain is added to your taxable income for the Financial Year and taxed at your marginal rates. Depending on your financial circumstances for the year, you may want to sell an asset before 30 June or after 30 June to minimise your overall tax position.
Businesses on an Accrual Basis for Tax.
- Accounts Payable. Where you have received a service if you have an invoice dated prior to 30 June then you can claim a tax deduction for the service provided.
- Write Off Bad Debts. Where you determine and document that a debt is uncollectable and uneconomical to pursue, then you can write the debt off and you will receive a tax deduction for this bad debt written off.
Other End of Financial Year Matters to Look At:
If you have commenced an Account Based Pension in your Self Managed Super Fund, please make sure you have withdrawn the minimum pension payment for the year. Please contact us if you need any assistance.
Have you recorded a log book for a continuous 12 week period where you use a motor vehicle for business or work?
Division 7A loans For Companies. Where companies have Division 7A debit loans to shareholders, please make sure cash repayments are made to the company or dividends will need to be paid to shareholders. Any unpaid present entitlement of trust distributions to companies will need to be paid in cash to the company or Division 7A will also apply and dividends will need to paid to shareholders as loan repayments.
Record the Value of Stock at 30 June.
Trustee Resolutions allocating the profit for the year for a Discretionary Trust (Family Trust) need to be prepared and signed before 30 June. Please contact us if you need assistance to prepare your Trustee Resolution.
Superannuation Contribution Caps for the 2018 Financial Year
Important: This is General Advice and you need to seek Accurate Advice for your circumstances. In general, this only applies to individuals with less than $1.4 million of total superannuation benefits.
The Concessional Contribution Cap is $25,000 for tax deductible (concessional) contributions.
The Non Concessional Contribution Cap is $100,000 for personal after-tax contributions where no tax deduction is claimed. Under the age of 65, averaging is still available where you can contribute up to $300,000 in one financial year and then cannot make any further contributions for the next two financial years.
Individuals aged 75 and over are not allowed to make personal contributions and those aged 65 -74 need to meet the Work Test to make personal contributions. To meet the Work Test, you need to work 40 hours in a 30 day period at some point in the Financial Year of the contribution.
Deductible (Concessional) Super Contributions are one of the best tax saving options available as the contributions are taxed at only 15% while a tax deduction can be claimed at either 21%, 34.5%, 39% or 47% depending on an individual’s marginal tax rate. You also get the benefit of keeping 85% of the contribution to add to your superannuation to manage towards your retirement.
Self Managed Super Funds
Self Managed Super Funds have great tax benefits offering the lowest tax rate of 15% and if member accounts go into pension before assets are sold, generally capital gains and income can be tax free. We are licensed with SMSF Advisers Network to provide you with licensed superannuation advice that you require. Generally, it is advisable to have a minimum of $200,000 of superannuation benefits before setting up an SMSF. However, if you want to access an investment class such as specific residential or commercial properties or cryptocurrencies that you can’t access in your industry fund, you can setup an SMSF to access this asset class but you will need superannuation advice. Please contact us to discuss the advantages and disadvantages of SMSFs and how they can apply to your financial situation.
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