With 30 June fast approaching, now is the time to prepare and take action to ensure you mininise your tax commitments. This article will provide a summary of items to consider for your business in the lead up to the financial year end, including several items that are unique this year due to COVID-19.
With COVID-19, many businesses have suffered significant drops in profit which means that traditional tax planning is not required. However it still may be worthwhile doing some interim planning to determine your likely tax liabilities to see whether any variations can be made to your June PAYG instalment to assist your cash flow. Some have applied to the ATO for deferrals in these instalments but many businesses and taxpayers are still paying these. With the impact of COVID-19, these instalments may be overstated.
Discretionary and family trusts still need to ensure they have prepared and documented their annual profit distributions to beneficiaries before 30 June. If the ATO discovers that the trust has not prepared this documentation it will charge the trustee the full 47% on all the trust’s earnings. So trustees should consult with their accountants to estimate the most tax effective distribution.
If you are one of the lucky businesses who still has a tax problem post COVID-19 then the same annual tips apply:
- Look to defer income invoiced if possible until after 30 June 2020
- Look to bring forward or prepay any expenses prior to 30 June 2020 such as subscriptions, rental payments, interest payments, stationery or repairs
- Look to see whether any bonuses will be owing to staff or owners for the year. These can be accrued and are deductible to the business this year but if they are paid to the individual after 30 June they won’t be income to the recipient until the 2021 financial year
- Ensure you have maximised your superannuation contributions
- Look at your debtors and see whether any can be written off and review any stock to see if any is obsolete and can be written off
- If the business needs a new asset look to purchase this and have it ready for use before 30 June 2020. The immediate asset write off has been increased due to COVID-19 to $150,000 which gives businesses the opportunity to claim all the depreciation on such assets in the 2020 year
If you need assistance with your tax planning, please do not hesitate to contact us.