Maximize your tax deduction – Businesses
In this article we explore how businesses that have turnover less than $10 million can maximise their deductions to save on tax for 2018 year and other issues they need to be aware of – deadlines, things to do etc in the coming few weeks. We will touch on employee superannuation payments, $20,000 asset write off etc
This article will apply to businesses running as sole traders, companies, trusts and partnerships.
Employee Superannuation Guarantee Payments
For businesses that have employees, it would be a good idea to pay your employee’s June 2018 quarter super soon after you have finalized the last payroll of the year. You need to ensure that the employer contributions are received by your employee’s super fund accounts by 30 June in order to claim it as a tax deduction for 2018 year. You can use your accounting software’s super clearing house or the Small Business Super Clearing House (SBSCH) to make the contribution.
For those with Xero Payroll Auto Super function, Xero suggests that the Auto Super be processed by 22 June 2018 in order for it to be claimed as a tax deduction for 2018 year. For those using the ATO’s Small Business Super Clearing House, the ATO suggested a deadline of 15 June 2018.
If payments are not received in employee’s super fund accounts by 30 June 2018, it will be claimed as a tax deduction in 2019 year. The due date for lodgment and payment of the June 2018 quarter super is 28 July 2018.
Closing stock – stocktake done on 30 June
For businesses that trade or use materials for jobs, you will need to do a stocktake on 30 June 2018 to work out the stock on hand as at 30 June 2018.
Stock is anything your business produces, manufactures or acquires, for the purpose of manufacturing, selling or exchanging. Livestock is also trading stock.
It is important for us to have the closing stock figure to work out your business’ net profit.
You are able to claim a deduction if you prepay tax deductible expenditure when the prepayment period ends by 30 June 2019. This can be payments like 12 months subscription to professional journal. Note certain types of expenditure are excluded from the prepayment rules. For example:
- amounts of less than $1,000 (excluding input tax credits)
- amounts required to be incurred by a court order or law of the Commonwealth, state or territory
- payments of salary or wages (under a contract of service)
- amounts that are capital, private or domestic in nature (except certain research and development amounts)
- certain amounts incurred by a general insurance company in connection with the issue of policies or the payment of reinsurance premiums.
$20,000 asset write off
Business owners will be very familiar with the $20,000 asset write off deduction. The Government has decided to extend this write off for another year to 30 June 2019. We noticed that clients are getting mixed messages about what you can claim using this deduction.
The $20,000 asset write off can only be applied to small businesses (turnover under $10 million) when they purchase an asset that cost less than $20,000 (excluding GST if you are GST registered, or including GST if you are not GST registered). The whole asset cost is taken into account even when the asset is used partly for business.
e.g. A business that purchased an equipment for $30,000 but use it 40% for business is not eligible for the $20,000 asset write off deduction, the equipment has to be depreciated over a few years.
If you have a trust structure, you will have to review your 2018 trust profit and work out the trust distribution before 30 June 2018.
Clients will soon receive an email from us regarding their trust minute 2018. Please advise us if, during 2018 year, you have had a relationship status change (e.g. got married), or have children turning 18 over the last year, as this may change the way you distribute your trust profits.
Upcoming due dates – PAYG Payment Summaries
Once you have processed the payroll for the 2018 year for your employees, you may want to commence the 2018 payroll reconciliation and then prepare PAYG payment summaries to be distributed to your employees by 14 July 2018.
If we prepare your year-end accounts, please contact us to have your reconciliation done prior to preparation of the PAYG payment summaries, as we can fix any errors or discrepancies we find so that the PAYG payment summaries that you issue to your employees are accurate.
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