Business Owners: What to do before June 30?
With just under two months to go until the end of the financial year, now is the time for business owners to review their final tax strategies for 2016/2017. It is also time to ensure that all last minute payments, tax deductible items and purchases are completed.
For businesses that operate through discretionary trusts it is also time to review final estimated profits, and hold the annual meeting to sign off on profit distributions before June 30. Distribution of funds to recipients on lower tax brackets can potentially minimise tax payments that will arise after lodgement of income tax returns.
Prepay Expenses & Finalise Purchases
Purchasing items before 30 June can bring forward tax deductions. Small businesses with turnovers less than $10m are also able to utilise the $20,000 instant asset write-off (accelerated business depreciation). If you are planning any asset purchases in the coming months, it may be beneficial to bring the deduction forward. From 1 July 2017 this threshold is reducing back to $1,000, so getting these purchases in before 30 June is more important than normal.
Pay June Quarter Superannuation Early
Superannuation payments are only tax deductible when the payments have been made. Whilst not due until the end of July, many businesses take the opportunity to pay June quarter superannuation amounts early to lock in tax deductions for the current financial year.
Finalise Superannuation Contributions for Yourself
Business owners are generally able to claim full deductions for superannuation contributions, up to the concessional limits of $30,000 for people aged under 50 and $35,000 for those who are older. Take the time to review your superannuation, and consider whether an additional contribution should be made before June 30 to assist in minimising tax.
Review Debtors & Write-Off Bad Debts
The month of June provides an opportunity to review outstanding debtors. If there are any amounts that are not going to be paid, these can be written off as a bad debt to offset profits.
Small businesses with inventories or stock on hand are required to estimate their stock levels as at 30 June. Medium and large businesses are required to undertake a formal stock take. In reviewing stock levels on hand businesses are able to write off any lost, damaged or obsolete items.
The end of a financial year provides a good opportunity to review business structures and processes, and set in place new changes from the start of the next tax year. This may be the setup of a new tax structure or even a change in accounting software or processes.
If you have any questions or require assistance in getting things organised before June 30 we are here to help.