Hi, my name is Adam Stewart, Debt Collection Expert and owner of ADC Legal Litigation Lawyers.
It is that time of the year again for businesses and companies to get your tax affairs in order. This is the time to sit down with your financial controller and work out which tax deductions you or your company are entitled to in the run-up to the end of financial year.
For small businesses, it’s time to look at how much tax you have pre-paid, if any, then make allowances for tax payments in your cash flow.
My accountant suggests that we look at our profit and loss statements monthly and set aside money for tax and GST purposes. We put the money aside into a high interest account, then pay tax and super only when it becomes due. These suggestions are a great way to handle cash flow as well as maximise interest on your money.
It is important to budget for these tax payments since the ATO has become a lot more aggressive these days in calling in debts. They charge heavy penalties and they will not hesitate to bankrupt people or businesses.
Here are my general tax tips and deductions for 2016:
1. Small business immediate write-off
For people running a small business, do not forget you could still take advantage of the $20,000 instant asset write-off for buying business equipment. This deduction applied to those who buy a business asset for under $20,000 and claim it as a tax deduction this year.
There have been some great tax concessions over the past few years for small businesses (up to $2 million turnover) with none greater than the immediate write-off available for the purchase of new business assets that cost less than $20,000. If this is you, then take advantage of it. The big advantage was there is no limit to the amount of assets people can purchase under this concession.
The only thing to consider is your cash flow, so do not go too crazy. See this link for more information.
This is something many people did not think about, but my accountant gave me a handy tip. He said many people do not know about the government’s free money service known as the super co-contribution.
What is super co-contribution? Basically,if your income is under $35,000.00 and you contribute $1000 post tax into super, the government will match it 50 cents in the dollar.
The incentive gradually phases out for those earning more than $50,000.00, but this is free money the government is giving away.
3. Private health insurance
Another tip from my accountant: prepaying your health insurance could be a massive saver and would end up saving you more than you think.This is especially the case for high income earners. A 27.82% rebate on private health insurance premiums gradually phases out for those who earn over $90,000 (single) or $180,000 (couple).
If you are currently under these thresholds but think you will earn above these levels in 2016-2017, you can still get the rebate in full if you prepay 12 months of premiums before July 1.
4. Capital gains
This little benefit is not just for those who own homes. In fact, you can do it against most investments, including the share market.
It’s about tax minimisation, so you could possibly minimise capital gains tax (CGT) by deferring the sale of or offsetting losses against gains already made., depending on your current year’s income. You can claim it now or defer it.
5. Prepay rent
If possible, prepay rent for as much as you can afford and receive a tax deduction. If you are facing a high taxable profit this year, but expect it to drop next year, this is a good way to shift it from 2016 to 2017.
6. Write off fixed assets
Go through your depreciation schedule from your last tax return and note items that are either no longer in existence, broken or have no value. Tell your accountant before June 30 so that you will be able to write off the written down value of those assets during the 2016 year.
7. Write off bad debts
Go through your debtors ledger and write off debts, which do not appear to be collectable prior to June 30. Refer those same accounts to Debt Recoveries Australia, our debt collection partner. If debt collection is successful, it can be brought back into your accounts.
For more information on how you can make most of tax time, call me at 1300 799 820 or email me at firstname.lastname@example.org. You may also Skype me at adclegal.