HAS THE END OF THE FINANCIAL YEAR CAUGHT YOU OUT?

The end of the financial year is almost here, so business operators should already have their tax planning strategy for this year established. If not, there is still time to review the situation and have some short-term processes in place in order to meet the 30 June transaction deadline. The following information should assist for those business owners who do not have the guidance of a bookkeeper or accountant.

Where possible, pre-pay some of next financial year’s expenses in this financial year. Typical expenses that could be paid now are rent, insurance, professional subscriptions and others. At the same time, review customer invoices already in your system to identify those you could postpone until July. The object is to increase expenses and reduce income in this current year by deferring both until next year. Just make sure your cash flow can accommodate these transactions.

This year, the ATO (Australian Taxation Office) is allowing instant tax write-offs of $150,000 for both new and used assets, so you can immediately deduct the business assets purchased from the assessable tax. Check the ATO website for eligibility criteria.

Every business has debtors it is hoped will settle their outstanding invoices, but now is the time to be realistic and review them objectively. If they are unrecoverable, you can write off these debtors in the current financial year, regardless of the year in which they were incurred.

Superannuation is another area where you need to be up to speed with tax planning. If you are a sole trader or a micro business, you may be paying into a retail superannuation fund. If you haven’t already done so, top up your voluntary superannuation contributions before 30 June, up to a limit of $25,000. However, if you have an SMSF (self-managed superannuation fund), there are specific things you need to be doing before the financial year end.

Remember that an SMSF exists solely for the purpose of providing retirement benefits for its members or their dependents. SMSFs are regulated by the ATO and there are severe penalties for non-compliance with items such as reporting, timelines for lodging documents and other statutory requirements.

For this reason, tax planning for an SMSF could differ from the typical end of financial year transactions that a business can legally perform. For business owners who, especially at this time of the year, are knee-deep in running their businesses, the last thing on their minds is likely to be the extra work involved in managing their SMSF.

Many business owners have found the best of both worlds by engaging companies similar to SMSF Assure to help them manage their administration responsibilities, make smart decisions and avoid costly mistakes. In this way, they are able to still be involved in building the investment portfolios that will ensure a comfortable retirement for the members, without the time-consuming and administration work involved.

For those of you who have left your tax planning until the last minute, deal with today’s issues and start planning for the next financial year. It will come around soon enough.

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