The end of the 2020 financial year is fast approaching. Have you looked at the financial performance of your business to date? What about your year to date personal/family income and expenses?

Now is the right time to take stock and review all this.

Over the next few days, you can take appropriate steps to reduce your taxes for the current year. And at the same time, put strategies in place to improve your businesses performance. You can discuss strategies for the coming year with your financial advisors. It’s also the perfect time to create budgets and forecasts for the upcoming year.

Here’s what you’ll learn in this blog:

• 10 ways businesses can reduce their tax bill
• 5 tips to decrease personal tax bill

Top 10 Tax Planning Tips for Businesses

Minimize your business tax bill this year with our top 10 tips. Make sure you’re doing everything you can to save your business unnecessary expenses.

1. Prepayments

Did you know you could prepay some of your expenses like Rent, Insurances, Interest etc? If you’re expecting a higher income in the current year compared to projections for next year, you can prepay up to 12 months of the following year’s expenses and can claim a deduction.

2. Instant Asset write-off

Did you hear that the instant asset write-off threshold has increased from $30,000 to $150,000? You should take advantage of this. Businesses with an aggregated annual turnover of less than $500 million should take advantage of this increase. It applies from 12 March 2020 until 31st Dec 2020, for new or second-hand assets first used or installed ready for use in this timeframe. instant asset write-off criteria and thresholds have changed over time so it is important to check. For more information and eligibility, please refer to this

3. Review your Debtors

Make sure you review your debtors to write off any unrecoverable debts.

4. Stocktake

Does your business carry stock? If you do, make sure you do your stocktake as of 30 June 2020. If your estimated closing stock (and opening stock) is less than $5,000 you do not have to do a stock take. Review your stock and write-off obsolete or damaged stock.

5. Accelerated depreciation

Businesses with an aggregated turnover of less than $500 million are able to accelerate their depreciation deductions on the purchase of certain new depreciable assets. This applies to eligible assets acquired and first used or installed ready for use from 12 March 2020 until 30 June 2021.

A small business (turnover up to $10 million) could deduct 57.5% (rather than 15%) of the business depreciating asset.

6. Delay deriving assessable income

Deferring invoicing and receipt of income, where appropriate.

7. Superannuation Contributions

Make sure you pay your employer super guarantee before 30th June to get a tax deduction in the current financial year.

8. Keep Good records

Be honest, have you been keeping good records this year? Now is the right time to get your business and taxation records organised. Need help with organising your records? We’ve got you back. Book a free consultation today…

9. Trust resolutions

The trustees of discretionary trusts are required to make and document their resolutions on how the income from the trust is distributed to its beneficiaries before 30th June.

 10. Business Asset Spending

One of the most common questions we’re by business owners is “Should I buy this equipment or service?” Our answer – Spending on business assets for the sake of claiming a deduction is not correct. In most cases, you will only save 30-45 cents (depending on the business structure and your tax rate) for every dollar you spend. The question you should be asking yourself is “Do you need that equipment or service?” Will it benefit you and your business?

Top 5 Tax Planning Tips for Individuals

Here are our top 5 tips for individuals to help you do everything you can to minimize your 2020 tax bill.

1. Voluntary Super Contributions

Top up your voluntary superannuation contributions. The concessional contribution cap for 2020 is $25,000. You should discuss this with your financial advisor. Together you should explore how much voluntary contribution you can make.

From 1 July 2018, if your superannuation balance is less than $500,000 on the previous 30 June, you can make or receive concessional contributions of up to $25,000 per annum.  You may be able to accrue unused amounts for use in subsequent financial years.

2018/19 is the first financial year you can carry forward unused cap amounts. And these amounts can be used from 1 July 2019. Unused cap amounts can be carried forward for up to five years. Here’s an example to help you make sense of all that:

If your spouse is a low-income earner or not working at the moment, you can contribute towards super and get a tax offset. For Eligibility conditions, please refer to this.

2. Employees working from Home

The ATO (Australian Taxation Office) has introduced a “short-cut” method to calculate your working from home expenses. Under this new method, you can claim 80 cents per work hour. You can read more about Home Office expenses in our Home Office Expenses article.

3.Motor Vehicle Expenses

Do you use your car for work-related purposes? And do you use the logbook method to keep records? If you do make sure to update your logbook and record your odometer reading at the end of the year.

If you use a cents per km’s method, make sure that you have an appropriate written record of how it’s calculated.

4. Prepayments

Is your income high in the current year? A high income could be due to a one-off capital gain event or for some other reason (for example Discount on Employee share scheme). Did you know you can reduce your tax by prepaying certain expenses for the coming year? Here are some examples of expenses you can prepay:

• Income protection insurance
• Donations
• Subscriptions

Do you have an investment property? Save by prepaying expenses for the property like interest and any relevant insurances. You can use our negative gearing calculator or tax calculator to work out your savings

5. Other Household Expenses

This is where keeping a personal balance sheet and profit loss throughout the year helps. Other household expenses include:

• Home insurance
• Car Insurance
• Income protection insurance
• Home loan interest rates
• Investments loan interest rates.

If you pay your insurance premiums as a lump sum, you can often get a discount of 5-15%.

So, take this tax time to review your living expenses and investment costs. Compare what you have to what’s available in the market and see if you can negotiate better deals.

For more information on 2020 individual tax return, please refer here

Here’s something investors should know about

Early-stage innovation company (ESIC):

To encourage investors to support innovation, the tax incentive for ESIC gives investors a tax offset and concessional CGT treatment. The tax incentives available for eligible investors are:

• Non-refundable carry forward offsets – Eligible investors who purchase new shares in an ESIC receive a non-refundable carry-forward tax offset of 20% of the amount paid for their qualifying investments.

• CGT concessions -Capital gains on qualifying shares continuously held for at least 12 months and less than 10 years may be disregarded. Capital losses on shares held less than 10 years must be disregarded.

For more information on ESIC and eligibility conditions, please refer to this podcast.

Summary

So, there you have it, Our top tips to cut down your 2020 tax bill. Want help with the current year’s taxes? We’ve got your back. We can also help with creating budgets and forecasts for the coming year.

If you have any questions or need help you can contact our office on 039005 5762 or book an appointment online today.

ThinkWiser is a boutique Accounting firm based in South Morang, Victoria. We provide Accounting, Bookkeeping, Tax compliance services to small businesses and individuals throughout Australia through video-conferencing. We provide Mobile Accounting & Tax Services to the following suburbs: Mernda, Doreen, Yarrambat, Mill Park, Bundoora, Plenty, Craigieburn, South Morang & Melbourne. For any queries, please call us on 03 9005 6762 or email us at [email protected]

The information provided on this website is general in nature only and does not constitute personal financial or Business advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.