End of Year adjustments to make saving by tax planning

INVESTMENT PROPERTY DEPRECIATION

If you own a rental property and haven’t already done so, arrange for the preparation of a Property Depreciation Report to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property. But most of all if you order and pay for the cost of the depreciation schedule to be created this financial year you can claim the cost and reduce your taxable income to get a bigger refund while you’re at it.

PRIVATE COMPANY (“DIV 7A”) LOANS

Business owners who have borrowed funds from their company in previous years must ensure that the appropriate principal and interest repayments are made by 30 June 2022. Current year loans must be either paid back in full or have a loan agreement entered in before the due date of lodgement for the company return or risk having it counted as an unfranked dividend in the return of the individual. This is an important and complex area and we understand if you need more help in this area, but there are strategies to help avoid and fix this issue for you.

YEAR END STOCKTAKE / WORK IN PROGRESS

If applicable, you need to prepare a detailed Stock Take and/or Work in Progress listing as at 30 June 2023. Review your listing and write-off any obsolete or worthless stock items.

Talk to us about your different options for valuing Stock, and how they affect your tax payable.

WRITE-OFF BAD DEBTS

While if you’re doing your books on a cash basis, this might not help, for others you should look to review Debtors and the process. Review your Trade Debtors listing and write off all Bad Debts BEFORE 30 June 2022. Prepare a management meeting document listing each Bad Debt, as evidence that these amounts were actually written off prior to year-end, and enter these into your accounting system before 30 June 2022.

When you write off your bad debts your reducing your sales which means less profit on paper and can mean you pay less tax.

PREPAYMENTS

“Small Business Concession” taxpayers can make prepayments (up to 12 months) on expenses (e.g. Loan Interest, Rent, subscriptions) BEFORE 30 June 2022 and obtain a full tax deduction in the 2022 financial year. Certain expenses have maximum prepaid terms, so be sure to maximise your position before the year’s end. Prepayments could free up cash flow later in the year and reduce your taxable income this year.

TRUSTEE RESOLUTIONS

Ensure that the Trustee Resolutions are prepared and signed BEFORE 30 June 2022 for all Discretionary (“Family”) Trusts. Please see us for more information about these resolutions.

If you use a Trust structure, one strategy is to allocate profits to a “Bucket Company” and cap your tax at 25% for a base rate entity for the 2023 year. Note that this company must have business operations to qualify for the reduced company tax rate, however, if not you still get the reduced rate of 30%. Later as the company makes money and has paid tax, you can get the dividends out by paying Franked Dividends to the shareholder who could be a low-income earner and get all the franking credits back.

This article is provided as general information only and does not consider your client’s specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability require a detailed analysis of a client’s specific circumstances. © Business Edge Advisors