With the year coming to an end it is important that you implement any tax minimization strategies prior to 30 June 2017, as once the year has come to an end it will be too late. (in most cases)
Below I highlight some strategies that may be useful – I have not gone into too much detail here as the purpose of this article is simply to bring these matters to your attention – should you require further information and prior to acting on this information please contact this office.
If your income for the year is below $51,021, then you are entitled to receive co-contributions (up to $500) from the government if you made any after tax contributions to a complying Superfund.
The amount of the government co-contribution you will receive depends on how much you contribute and what your income is.
In short if more than 10% of your income comes from employment or business (as opposed to rental, etc.) and your income for the year is lower than $51 021, then the government will make a contribution (up to $500) towards your super for every dollar of personal contribution you make.
I do not want to go into too much detail here, but there is calculator here you can use https://www.ato.gov.au/Calculators-and-tools/Super-co-contribution-calculator/
Small Business Asset Write-off.
Remember if you have an ABN or separate business entity classified as a small business then any asset purchased for business purposes costing less than $20 000, can be written off as a tax deduction immediately.
This write of is available until the end of the 2017 tax year,and applies to each asset individually.
What many people do not know is that this also applies to assets purchased in prior years that have been pooled and if the closing value of the pool at year end is less than $20 000.
This means that assets purchased prior to 12 May 2015, (when this law was enacted) may be deducted in one year if they form part of a pool which has a closing value of less than $20 000 by the end of June 2017.
Primary producers can:
Immediately deduct the cost of fencing assets and water facilities
Depreciate the cost of fodder storage assets over three years.
Log Book – Travelling Expenses
One of the largest deductions for employees that use their motor vehicle for work is normally the traveling expense deduction – the ATO allows two different methodologies to calculate this.
But without a doubt the methodology that is most favorable to tax payers most of the time is the log book method – yet time and time again a client will come in to complete a tax return and have paid a substantial amount for a nice flashy car and because no logbook was kept, the deduction able to be claimed is severely limited.
Remember you only need to keep a logbook for 12 weeks and then this can be used for up to 5 years.
Tax offset for super contributions on behalf of your spouse
If you make contributions to a complying superannuation fund or a retirement savings account (RSA) on behalf of your spouse (married or de facto) with an assessable income of less than $13 800 (including fringe benefits and reportable employer super contributions) or not working, you may be able to claim a tax offset.
Effectively if all conditions are satisfied and you make an after tax contribution to your spouse’s Superfund you will receive a tax offset of 18% of the contribution, limited to $540.
Immediate deductions for prepaid expenses
If you are classified as a small business, you can claim an immediate deduction for prepaid expenses where the payment covers a period of 12 months or less that ends in the next income year.
Effectively if you pay any expense now but it relates to the following year then you get the deduction in this year – the prepayment cannot be for a period longer than 12 months.
So for instance if I pay my rent now for 8 months (starting from 1 April 2017) – no problem I can claim the tax deduction in this year – but if I pay rent for the next 14 months then I cannot claim it this year because it was for a period longer than 12 months.
This deduction can also be claimed for expenses paid relating to rental properties.
Changes to business structures.
The new tax legislation which came into effect from the 1 July 2016 allowing small business owners to change their business structure and defer capital gains and income tax consequences has had the result that many of our clients are now considering or have changed their business structure from 1 July 2016.
This new legislation effectively defers any capital or income tax gains or losses on the transfer of assets that are CGT assets, trading stock, revenue assets, and even depreciating assets when a business changes its business structure.
Immediate deductibility for start-up costs
From 1 July 2015, you can immediately and fully deduct certain expenses associated with starting up a new small business. This applies to the following expenses you may have had when setting up your business:
Professional, legal or accounting advice
Australian government fees and charges.
Concessional Contributions to Superfund.
Depending on your age contributions totaling $30 000 or $35 000 to a Superfund are tax deductible in the 2017 tax year.
If you own your own business then by making these contributions to an approved fund will entitle you to claim it as a tax deduction, if you are an employee you will need to (in most cases) do this via a salary sacrifice arrangement.
These amounts must be received by the Superfund by the end of June 2017, and will pay tax at a rate of 15% in the Superfund.
Feel free to contact this office should you like to discuss any of these issues with us.