June 30 is less than two months away and we recommend small business owners start tax planning now. A little time invested this month will see you prepared administratively, and can also reduce your tax bill and help to set up your financial future.
There is no one size fits all process for tax planning, and we hope to review plans individually with each of our small business clients. However, this checklist will help you to start thinking about the key issues.
1. Make sure employee super is paid in full and on time
The minimum superannuation contribution is 9.25% of ordinary time savings. Unlike other expenses you cannot claim superannuation unless it has been paid and the funds received by the relevant fund. Make sure all superannuation payments are made in sufficient time for funds to be banked.
2. Consider increasing your personal super contributions
If you have the cash available within the business consider increasing your contributions to personal super. This gets some of your chips off the table and allows you to benefit from generous tax concessions. Obviously your own super will also have to be paid on time to be considered a tax write off.
3. Is insurance cover within your super fund sufficient
Some insurance benefits will not be available through your Superfund from 1 July 2014. It makes sense to ensure that you have the right cover before this deadline hits.
4. Review debtors and write off bad debts
Now is a good time to invest some energy in aggressively chasing your debts (although we must admit we think any time is a good time to aggressively chase debt). If some debt looks like it will not be recovered, you want to be able to write this off on 30 June.
5. Review depreciated asset list and write off unused assets
Print out your depreciated asset list and go through your assets one by one. Anything that you are no longer using can be written off at year-end.
6. Organise a year end stocktake
A 30 June stocktake is required to determine the correct value of your closing inventory. It also enables you to identify any obsolete or damaged stock that can be written down.
7. Consider what expenses can be brought forward
Take a look at your planned expenditure over the next few months. Are there expenses, such as training, repairs or maintenance that you could bring forward? If you are considered a Small Business Entity for tax purposes the ATO allows very generous options for prepayment of expenses, including prepayment of interest.
8. Make sure shareholder loans are properly set up and repaid
To avoid a deemed dividend and an unexpected tax bill, make sure that any shareholder loans are properly set up and repaid.
9. If operating in a trust, consider how profits will be distributed
Make sure the trustee has decided how profits will be distributed prior to 30 June. These decisions will need to be recorded and signed off before the end of the financial year.
We urge all small business owners to meet with their accountants in the coming weeks to discuss the above issues.