Business

  • Prepay expenses Prepaying certain expenses before year end can reduce your current year tax liability. If payments are due early next financial year, a pre-payment may entitle you to the tax benefit much earlier. The rules differ depending on whether the taxpayer is an individual, small business entity (SBE) or other business entity. Broadly, an SBE is a business entity that has turnover of less than $2 million. For other businesses, prepayment of consumables and other recurrent expenses will reduce your income; however, prepayment for stock will not reduce your income as this is not deductible until sold.
  • Business start up costs Commencing from the 2015/16 financial year, new businesses can deduct their formation expenses (ASIC fees, company formation costs, legal and accounting fees) as a 100% deduction in the first year. These costs were previously written off over 5 years.
  • Paying employee superannuation If an employer wishes to receive a tax deduction in the current year for employee superannuation contribution, the cash will need to be paid to the fund by 30 June. Make sure you allow yourself sufficient time for contributions to be processed. However, make sure that the employee is aware of the timing of the payment so as not to adversely impact their concessional contribution cap. All businesses (small business from 1 July 2016) should now be paying and reporting superannuation using a SuperStream compliant system.
  • PAYG payment summaries for employees Payment summaries should be provided to your employees by no later than 14 July. The PAYG payment summary statements need to be lodged with the ATO by 14 August with the "ATO original" payment summaries. Don’t forget to include reportable employer superannuation payments and reportable fringe benefits if these are relevant to your employees.
  • Reportable payments to contractors The reporting system for the building & construction industry for payments made to contractors is in place. These need to be reported to the ATO by 28 August.
  • Stock and consumables ATO rules require that stock be physically counted at year end unless there is a perpetual stock record system. Stock take records should be retained as part of the business records. SBEs can be exempt from conducting a yearly stock take if the value of stock has moved by less than $5,000 during the year. Businesses pay tax on the value of stock at the end of the financial year. It may be worthwhile to consider selling or disposing of slow moving stock, so that it is not counted in the year end stocktake. If you expect to purchase consumable items such as office supplies and cleaning products in the coming months, consider purchasing them before 30 June 2016. This will enable a tax deduction to be claimed in the 2015/16 financial year. ATO guidelines generally state that the purchase of office consumables to be used over a 3 month period is reasonable.
  • Bad debts Bad debts should be written off before year end to enable a tax deduction in the 2016 income year. The write-off entry must be processed in the ledger by 30 June. We recommend recording this in the minutes of the business after ensuring that all reasonable steps have been taken to recover the debt. There are a number of bad debt deduction provisions that apply to companies and trusts, so particularly for large bad debt write offs, you should ensure that you discuss this with your tax advisor to ensure that everything is in order.
  • Under $20,000 asset write off For businesses that are small business entities (turnover under $2m) depreciable assets purchased in the 2015/16 financial year can be written off in the year of purchase if the cost is less than $20,000. This up-front write-off will be also available to businesses with turnover exceeding $2 million but less than $10 million in the 2016/17 financial year*. Businesses in this category would be better to defer capital expenditure until after 1 July 2016.
  • Superannuation changes The Super Stream deadline for employers with 19 or fewer employees is 30 June2016 (larger employers should already be using Super Stream). It is recommended that employers with 19 or fewer employees ensure their system is ready for Super Stream as soon as possible.SuperStream is a standard for processing superannuation data and payments electronically, and must be used by: Employers, self-managed superannuation funds and; APRA-regulated funds Super Stream data is in a standard format so it can be transmitted consistently across the super system between employers, funds, service providers and the ATO. Super Stream allows employers to make all their contributions in a single transaction, even if they’re going to multiple super funds.
  • Tax exempt minor benefits Employers can provide minor and infrequent benefits, valued less than $300, to employees. Gift cards (excluding entertainment related gift cards, eg movie tickets, restaurant vouchers etc) of less than $300 (ie $299.95) are tax exempt to the recipient, deductible and FBT free for the employer. Gift cards should be not used in place of remuneration, but more so as a discretionary benefit.

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