Small business – decisions for end-of-year planning
If you own a small business, there are many decisions that you will need to make at the end of the year that have significant tax consequences. Hillyer Riches accountants & tax agents are standing by to assist you with any of these. We have put together some information that will be helpful when making these important end-of year decisions.
As a general rule, you can claim deductions for any expenses you incur associated with your income. Most of these deductions are pretty obvious like; rent, materials, supplies, marketing, etc. This year the tax office has increased the instant asset write off deduction to $20,000.
There are some expenses that are not so obvious that you may easily overlook. These may not pertain to every business, but you can check with this office to see if they may be applicable. Some of these commonly overlooked expenses are outlined below.
Interests on loans
You can deduct interested charged on borrowed money, loans, credit cards, overdrafts, and possibly other financial outlets. Also, interest that is accrued up to June 30, but not actually paid until after, may still be deductible in the current year.
Manage the value of your trading stock
If your stock level changes by more than $5000, you must take into consideration the value change as well. If the value is higher at the end of the year, then you will be assessed on that amount as income. If the value is lower, then it can be a deduction. Managing this value can be confusing, but our tax professionals can assist you with this if you have any questions.
Capital Gains Tactic
Consider any possible capital gains or losses your business may be sitting on. If there has been a gain, you may want to consider selling some assets to realise a loss, to help offset the amount before June 30th. If the sale will produce a gain, you may want to wait, so you will have the following year to make the offset. Of course commercial considerations should outweigh any tax implication of a transaction.
Good news about bad debt
If you have customers that have failed to pay for goods and services, then you can claim that amount as a tax deduction for bad debt. It might be good idea to go back through your paperwork and find any outstanding invoices and write them off before the June 30 deadline.
Commit to employee bonuses and director fee bonuses
You may be able to claim a tax deduction for employee or director bonuses expenses that have not yet been paid, if they are committed to the liability. If the business has committed to bonuses based on this financial year, even if they are paid until after June 30, the amount can be deducted this year (and declared in the directors tax return as income in the following income year).
Take advantage of the $20,000 depreciation while you can
The loss of value and wear and tear on assets can really add up. Some small businesses may forget these deductions. This new rule allows businesses to immediately write-off up to $20,000.
Vehicle depreciation rules changed
Small businesses are still allowed 100% for the first $5000 of any business vehicle costs. This is likely to be swallowed up into the $20,000 instant write off amount mentioned above. This new law is set to come into effect this year.
There may be other allowable expenses that your small business can deduct. One of our Caulfield tax agents can look at your individual situation, advise you and help plan your tax strategy for this year and years to come.
Hillyer Riches Management Pty Ltd is a Corporate Authorised Representative (No 466483) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. AFSL / ACL No. 223135.This document contains general advice only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.