With the end of another financial year just around the corner, you should be planning how to minimise your tax bill.
Here are a few tips from us on how to this might be achieved-
1. Minimise Capital Gains Tax (CGT): What is capital gains tax? A capital gain or capital loss is the difference between what it cost you to acquire an asset and what you received when you disposed of it. You pay tax on your capital gains. It forms part of your income tax and is not considered a separate tax, although it is generally referred to as capital gains tax (CGT).
If you realised a capital gain in the current year there are things you can do to potentially minimise the tax on that gain. For example, if you have another investment that has had a loss, consider selling that investment to offset the capital loss against your capital gain. Capital losses can only be offset against capital gains. There is no use paying tax on a capital gain this year only to have a capital loss next year that might never be used.
2. Taking advantage of losses: The year-end tax time is not only about minimising the tax we have to pay, but it is also about maximising the refunds to which you may be entitled. If you happen to have a loss this year, don’t always accept it. There may be ways for you to take advantage of your loss by paying a dividend from your business, which not only absorbs the loss but also allows you to maximise the refund you’ll receive by using the dividend imputation for the tax paid by the company.
3. Superannuation: You pay 15% tax on contributions made into your super fund. If you taxable income exceeds $18,200 you pay 21%. If it’s over $37,000 you pay 34.5% and even higher (up to 49%) if you earn more. For the current year, taxpayers can put a deductible contribution of up to $30,000 into their superannuation account.
For those aged 59 or over on June 30, the limit increases to $35,000. Please be aware that personal superannuation contributions can only be claimed as a deduction in certain circumstances. If you are unsure as to whether a contribution you make will be deductible, contact us to discuss.
4. Pay employee super: If you are an employer, pay the June quarter superannuation guarantee (SG) payments for your staff before 30 June: Super contributions are only deductible when they’re paid. These contributions would usually be due by July 28.
5. Deferral of Income: Delaying recognition of income until 1 July 2015 defers the tax liability on this income until the 2016 financial year. It is noted that this strategy requires careful planning, as you want to ensure you use your available thresholds in the current tax year as effectively as possible.
6. Prepay expenses: Small businesses (turnover of less than $2 million) can claim prepaid expenses, such as rent, lease payments, and accounting fees. Please call us before making significant prepayments to discuss the result in your circumstances.
7. Bad debts review: Review your debtors for any amounts that are unlikely to be recovered, and write them off prior to the end of the financial year. For businesses registered for GST on an accruals basis, this also has the added benefit of reducing your GST liability too.
If you would like any help with minimising you tax bill this financial year please contact Grange Business Partners, we’re happy to help!