Georgia Cutbush - Founder of Swanson Advisory & Chartered Accountant with more than 10 years of professional experience including KPMG, Hilton Hotels and Scentre Group (owner & Operator of Westfield)
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After enduring drought, fire and COVID-19 a tax return may not be high on your list of priorities, but it should be!
You need to act now to qualify for generous incentives such as, $150,000 instant asset deductions.
Don’t miss out! Organise your business expenses before the tax year ends on 30 June 2020
Time to qualify for $150,000 instant asset tax deductions
Is there a significant business asset that you have been thinking of buying for months? You could easily be entitled to a $150,000 instant tax deduction per asset for purchases made before 30 June. However, this deduction reduces to a mere $1,000 per asset after 31 December. If the asset costs more than the threshold, the deduction will have to be spread over the asset’s useful life, which could be 10 years.
Specific eligibility criteria applies, including:
Personal Super Contributions
Making additional superannuation contributions before June 30 could mean valuable extra tax deductions. Note these deductions are available only for contributions made out of after-tax funds, meaning that contributions paid by your employer or salary sacrificed do not qualify. Be careful, as you can contribute only $25,000 a year to super (which includes employer-paid and salary-sacrifice super). Significant penalties apply for exceeding this cap.
You must notify your superfund that you intend to claim this deduction and you must receive acknowledgement of this request from your fund. Further eligibility criteria can be found on the ATO's Website. Note, super deductions are only considered “paid” once they are received by your fund. For Employers this is also true make sure that your June super is paid prior to 30 June to be deductible this financial year, for those using the small business super clearing house payments are required to be made by 23 June 2020 to be deductible for the 30 June 2020 year.
Employers are required to pay their employees' super before 30 June to be deductible this financial year. For those using the ATO Small Business Super Clearing House, payments are required by 23 June 2020.
If your cashflow allows, you should consider pre-paying some of your business expenses for the 2020/21 financial year before 30 June 2020. Deductions are available for expenditure up to 12 months in advance if you are considered a small business entity. Common prepayments include insurance, subscriptions, professional memberships and rent.
Business Use of Personal Assets
A common missed tax deduction is not claiming the business use of your personal assets. Do you use your mobile phone for work? Do you need to drive your personal vehicle for work? Have you been working from home?
In recognition of COVID- 19 requiring many people to work from home, the ATO has introduced a shortcut method for claiming deductions for this. Provided that working from home was required to fulfil your employment duties and you were not carrying out minimal tasks such as checking your emails, you can claim a deduction of 80 cents for each hour worked from home between 1 March and 30 June 2020. This method covers internet, phone, stationery, computer consumables and other expenses. To qualify, you must keep a record of the of hours you have worked from home as a result of COVID-19, such as diary notes and timesheets. For further eligibility requirements, refer to the ATO's website.
It's always good practice to review who owes you money. If you have been chasing debtors to no avail, you can write them off as a bad debt. This will increase your expenditure and lower your taxable profit.
If you have a lot of slow-paying debtors it may be time to consider factoring, where you receive a fraction of your outstanding debtor balances upfront (as high as 95%), while a debt recovery company chases the debts for you. Sometimes the debt collector will pay you a bonus once they collect.
Depreciation and Obsolete Assets
Do you maintain a listing of all your fixed assets? You may still be depreciating assets your business no longer uses. These assets could potentially be written off, bringing forward depreciation deductions that would otherwise be applied to future years.
Time Value of Money
The Time Value of Money is a statement you may have heard before. Essentially, it means money is more valuable to you today than the same amount tomorrow. This applies now more than ever. If you anticipate a tax refund, the sooner you have this money, the sooner you can use it for other purposes, which could be income-generating, such as buying new business assets or investing.
Countless other tasks and people will compete for your attention this June, but do yourself a favour and put tax at the top of your list. It could mean cash in your bank accounts six months sooner, which could also mean another six months of more productive equipment and higher sales, or six more months more of investment income.
If you have any questions about your tax please get in touch with Swanson Advisory or your existing accountant. Swanson Advisory is dedicated to helping you, your business and employees thrive!
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