Your EOFY Tax Tips!
It’s nearly the 30th June 2021 – really, already?! So here’s our advice on some plans you might consider before we tick over to the next year:
As long as your aggregated income is under $50b, you may be eligible to write off the business use portion of new or used assets purchased before the 30th June 2021. Be aware though, to claim the deduction in the 2021 tax return, the asset must be installed and ready to go. To check on your eligibility, call our office.
However not all write-offs are worth it – particularly if they give rise to losses or fail to take advantage of low personal income tax rates. Give us a call to discuss.
Bring forward expenses!
Certain expenses, like superannuation expenses on behalf of employees, are only deductible when they are paid. For example, for you to claim a deduction for your June quarter contributions, make sure they are paid and received by the fund before the 30th June.
If your aggregated turnover is under $10m, you can also deduct certain expenses provided they do not cover a period of greater than 12 months. This may include prepaid interest, insurance premiums, subscriptions etc.
It might also be worth writing off some of those old bad debts so we can claim the expense this year.
If you are carrying trading stock, make sure you do a proper stocktake on the 30th June so any stock write-offs are realised in the 2021 financial year.
Reduce the company rate!
If you are a base rate entity (a company in business, aggregated turnover less than $50m, and less than 80% of your income is ‘passive’), your company tax rate is going down this year from 26% in the 2021 year to 25% in the 2022 year. This makes it even more important to bring forward expenses where possible or delay revenue – as long as you’re not in a tax avoidance arrangement of course. This will affect your franked dividends too – so the 2021 year might be the best to flush out dividends.
Sign your trust resolution!
We’ll be drafting up resolutions for trustees of discretionary (or family) trusts shortly to work out who will be eligible to receive distributions in the 2021 year. These normally need to be executed before the 30th June, and carefully done, can give us some great tax planning opportunities. It also avoids your trust potentially being taxed on the top marginal rate on the income.
Tip into super!
To make a valid concessional superannuation contribution for the 2021 year, make sure the funds hit the superannuation fund before the 30th June.
Members who have less than $500k in super may also contribute more than their $25,000 concessional limit by contributing their unused caps from previous years – call us to find out if this might apply to you.
Non-concessional (after tax) contributions can also be made to pump up your super. Depending on your superannuation balances this may be $100,000, or even more if you can access the bring-forward rules. To find out what the caps are, make sure you get in contact with us or speak to your financial adviser.
Concessional caps are also moving up from $25,000 in FY21 to $27,500 in FY22, and non-concessional caps are moving up from $100,000 to $110,000 in the same years.
Pay your pensions!
If your superannuation is in pension phase in your SMSF, make sure you pay the minimum pension (halved from normal rates for the year ended 30/6/2021) to avoid having your pension fund earnings taxed at 15%. We will be in contact soon to remind you!
Keep receipts and log books!
To ensure you are maximising your work-related deductions, make sure you’ve got all your receipts – uniforms, work-related travel, motor vehicles, subscriptions, phone expenses etc. And also keep a log of your working from home hours for 2021.
Keeping your car log book is essential to claim deductions under that method, so make sure you have a valid one otherwise you might miss out.
Contributed by David Gow.