It's tax time again – for many, the most dreaded time of the year.
With consumer confidence waning and a global financial market that's ready to fall at any moment, entrepreneurs could be forgiven for stressing out a little more this year when it comes to their tax bills.
But preparing for tax season and the new financial year doesn't need to be a stressful experience. We've assembled a panel of tax experts to help you get the most out of this time of year – and possibly save you some much-needed cash.
Here are the top 15 tax tips from Pitcher Partners tax partner Theo Sakell, Institute of Chartered Accountants general manager Yasser El-Ansary, Pitcher Partners tax partner Ray Cummings and Crow Horwath national tax director Tristan Webb.
1. Defer or bring income forward when you can
Businesses want to reduce their tax bills as much as possible, and one of the best ways to do that is through the deferral of income.
Pitcher Partners tax partner Theo Sakell says SMEs should look for situations where they can defer income into the next financial year, which will save them having to pay up.
"If you want to defer it, you can end up paying the tax 12 months later," he says. "Of course, if you have losses, you can also look for ways to bring income forward."
"It depends on the nature of your business and what you're really wanting to do."
2. Look for deductions where you can
The other thing you'll want to bring forward is deductions. Experts say if you have anything that you're looking at buying in the new year, then make sure you can bring it into the current year and deduct it.
3. Keep tax file numbers handy for trust distributions
There have been quite a few changes to the way trusts are set up and operated this financial year, and entrepreneurs will need to know exactly where they stand or they might end up paying excessive tax bills unnecessarily.
Pitcher Partners partner Ray Cummings says there are now laws about how trusts can distribute funds with regard to tax file numbers.
"There are new rules, and now when trusts are distributing income to a beneficiary they need to quote the tax file number, and then the trust has to report the details."
"There were certain concessional rules that allowed trusts to meet these notifications, but it could well be new beneficiaries you're thinking of distributing to haven't reported their TFN."
4. Prepare for the loss carry-back scheme
The Federal Government introduced a new loss-carry back scheme in the budget last month, which will allow businesses to claim losses of up to $1 million based on tax they have paid in the previous two years.
Institute of Chartered Accountants general manager Yasser El-Ansary says while legislation still hasn't been introduced for the scheme, businesses can still start preparing for it.
"The loss carry-back will only be available for businesses that have paid tax in the 2011-12 income year, and then find themselves in a position where they are in a loss the next year."
"So while we still don't have more details about how exactly the scheme will work, it's a good idea to start preparation."
"If businesses find themselves in a position where they have control over whether or not profits are derived in the current income year, as opposed to the next, they ought to think about the potential advantages that may be worth in bringing those profits to account in the current year."
5. Write down your bonuses in advance
You may not be thinking about bonuses until the end of the year. But according to these experts, even if you have an idea of what you're paying everyone, you should write it down and then claim a deduction on them.
Ray Cummings says you should document the decisions you're about to make regarding bonuses as soon as possible. "Don't let that get away from you," he says.
6. Over 50? Push your super to the max
If you're over 50 years old and have been pumping your superannuation full of extra cash, then you might want to think about doing it again – it'll be the last year you can.
The concessional contribution cap for people aged 50 years and over was set at $50,000 during the 2011-12 year, but next year that will be lowered. If you want to make the most of that limit, you'd best do so this year.
7. Write off home office supplies
Always remember to check off any home office supplies you might have. This includes maintaining a library for work purposes, along with other everyday items such as stationery, software and general equipment you would expect to find in an office.
You can also deduct your computer, but it's a capital expense and must be depreciated as per the ATO's guidelines.
8. Review the living away from home allowance
The government announced a change in the budget last month, where it will crack down on living away from home allowance schemes in order to save $1 billion. If your business is paying anyone under LAFH allowances, then tax experts say you need to stay aware.
Crow Horwath national tax director Tristan Webb says the government will be tightening the screws on what employees can or cannot access under the allowance.
For instance, access to the tax concession for temporary residents will be limited to those who maintain a residence for their own use in Australia, but are required to live away from work – some of
these workers are categorised as "fly-in fly-out".
And employees will be required to justify their expenditure on accommodation and food beyond the statutory amount.
There will also be changes for anyone signing into an agreement after May 8, 2012, and from July 1, 2014 for any contracts before that time.
For instance, a year limit will be placed on how long an employee can receive the benefit at any one work location.
"You need to be talking to your tax adviser about this," Webb says. "Particularly if you're entering new arrangements in the next year."
9. Write off any bad debts
If you're going to write down any bad debts, then you should make sure you've written down what these bad debts are and have them all detailed before June 30. If you don't have it organised before then, these experts say you can run into some big problems.
10. Keep the carbon tax in mind
The carbon tax is starting this year, but El-Ansary says there are still a few things businesses should keep in mind as they prepare for the next financial year – especially if businesses are looking at increasing prices.
El-Ansary warns that the Australian Competition and Consumer Commission will be cracking down on businesses using the tax as an excuse to raise their prices.
"The ACCC has said it will be keeping a close eye on all businesses to make sure the claims they make are justifiable in terms of raising prices."
While this isn't necessarily a tax-specific issue, El-Ansary says many businesses will be preparing their prices for the next year during end-of-financial-year preparations and, as a result, should be aware of what the ACCC is planning.
"Businesses that increase costs will need to be confident they can justify them."
11. Pay health insurance premiums up front
The government introduced legislation that will see the private health insurance rebate means-tested starting from July. In the next financial year, individuals earning under $84,000 and families earning under $168,000 will not be affected.
As income increases, the subsidy will decrease.
However, tax experts say if you bring forward that expense to this year – as some private health insurers are allowing – you may still be able to claim the rebate.
"I haven't seen anything that would suggest you wouldn't be able to get the rebate if you prepay this year," Ray Cummings says.
Of course, any legislation the government introduces could expand on this – businesses are encouraged to seek professional advice.
12. Revalue old or damaged stock
If you have some stock laying around that hasn't sold, then you can revalue it and save yourself some cash. Pitcher Partners' Theo Sakell says you can do this any time before June 30.
"If you're carrying stock that may be obsolete, or it may just be slow moving and hasn't been moved for some time, for tax purposes you can probably adopt a lower value on that."
"Anyone can do that to reduce the amount of closing stock, which therefore reduces the amount of tax profit and will obviously allow them to reduce their tax liability accordingly."
13. Look over car expenses
If you plan on claiming any of your car expenses, experts say you need to keep a keen eye on how exactly you've calculated them and had them written down well in advance.
"If you're claiming car expenses, and using the log book method, then you need to make sure it stacks up," Theo Sakell says.
"Just make sure you have everything in order there and all written down. Missing details later on can be problematic."
14. Reviewing the fringe benefits tax
Last year, the government changed the way fringe benefits tax is calculated, especially when it comes to vehicles. Previously, the tax was calculated by multiplying the statutory rate of the car, but this has been replaced with a flat rate of 20%.
Tax experts say businesses need to determine if they should get rid of a car or two, and look at how cars are being placed in salary packages – businesses may find it's not very tax efficient.
The other aspect here is to make sure you're calculating FBT in the most efficient way. There are two methods – the 50/50 method or the register method.
The 50/50 method results in the total taxable value of meal entertainment come to 50% of total expenses, while the 12-week register method sees total taxable value equal the total amount of expenses. In this situation, that value is then multiplied against the "register percentage".
Experts say you should look at either method to determine which is better for your business.
15. Trusts – keep a close eye on distribution determinations
The government has really started cracking down on trusts in the past year, and experts say you need to be aware of what the changes are.
Many SMEs use trusts as part of their overall corporate structure – and Tristan Webb says entrepreneurs need to be aware of some changes when it comes to making distribution determinations. Prior to this year, trusts have had until August or so to complete these determinations. Now, they're due by the end of June.
"Make sure you have a look and review your trustees, and then find out when they're required to make a determination for the year. Sometimes that can be as early as June 28, but most of the time it's on June 30," he says.
"Whenever a trust deed requires that a determination be made, it's crucial that it's actually made."
03/09/2015 03:09Sydney, Australia. 3 September,2015