How to minimise your tax before 30 June (without breaking the rules)
Write-off bad debts
To be a bad debt, you need to have brought the income to account as assessable income and given up all attempts to recover the debt. It needs to be written off your debtors’ ledger by 30 June. If you don’t maintain a debtors’ ledger, a director’s resolution or minute of meeting confirming the write-off is a good idea.
Write off any stock that is damaged or obsolete. Complete a stock take (if you are not using the simplified trading stock rules) and remember that stock can be valued at the lower of cost, replacement, or net realisable value. You can use different methods for different stock items.
Review your asset register and scrap anything obsolete
Check to see if obsolete plant and equipment is sitting on your depreciation schedule. Rather than depreciating a small amount each year, if the plant has become obsolete, scrap it and write it off before 30 June.
Repairs, office consumables & trade gifts or donations
Consider paying for any required repairs, replenishing consumable supplies or trade gifts or donations before 30 June. Remember that if you don’t need it, don’t spend it. The ATO are not going to reimburse you for the full cost of these expenditures.
Plant & Equipment Upgrades
With the recent announcement extending the immediate tax write off provisions to businesses turning over < $50M and increasing the threshold to $30,000, consider upgrading equipment if no longer effective or efficient. We say again, if you don’t need it, don’t spend it. The ATO are not going to reimburse you for the full cost of these expenditures.
Pay June quarter employee super contributions early
The next quarterly superannuation guarantee payments are due 28 July, however some employers choose to make the payment prior to 30 June to bring forward the tax deduction instead of waiting another 12 months for the deduction.
Don’t forget yourself. Superannuation can be a great way to get tax relief and still build your personal wealth. Your personal or company sponsored contributions need to be received by the fund before 30 June to be deductible and a notice of intent form completed and lodged.
Capital gains and losses
Neutralise the tax effect of any capital gains you have made during the year by realising any capital losses. These need to be genuine transactions to be effective for tax purposes. It may be possible to contribute assets with unrealised losses to superannuation in order to do this.
Directors’ fees and employee bonuses
Declare them before 30 June and providing the company is absolutely committed to them, you are entitled to the deduction even if they have not been paid prior to 30 June. Again, a director’s resolution or minute of meeting is a good idea. The directors and employees only need to declare this income in the year of receipt, although they need to be formally notified of their entitlements by 30 June.
Where management fees are charged between related entities, make sure that the charges have been raised by 30 June. Where management charges are made, make sure they are commercially reasonable, and documentation is in place to support the transactions. If any transactions are undertaken with international related parties then the transfer pricing rules need to be considered and the ATO’s documentation expectations will be much greater. This is an area under increased scrutiny.