Smart End of Financial Year strategies 2017/18

Published 5 June 2018

With the end of the financial year approaching, it’s a great time to make smart decisions about your finances. Taking action before 30 June can open up more opportunities for you. We know that there isn’t a one-size-fits-all solution to accounting, wealth management and business growth. So we’ve outlined some tax-effective strategies that you may benefit from. We can help you find what strategies are right for you and/or your business.


For Individuals

Smart Superannuation Strategies

Seven super strategies that may help reduce your tax liability whilst building your super savings for your retirement.

If you… You may want to…  So you can…
1. Get more from your salary or bonus Are an employee. Sacrifice your pre-tax salary or bonus into super rather than receive it as cash. – reduce tax on your salary or bonus by up to 34%
– take advantage of the contribution cap that applies in this financial year
2. Make tax deductible super contributions Earn less than 10% of your income2 from eligible employment (e.g. you are self-employed or not employed). Invest in super by making concessional contributions. – claim your contribution as a tax deduction- take advantage of the contribution cap that applies in this financial year
3. Make after-tax contributions
to super
Have an investment in your own name. Cash out the investment and use the money to make a personal after-tax super contribution1. – reduce tax on investment earnings by up to 34%
– increase your retirement savings
4. Use super to manage Capital
Gains Tax 
Make a capital gain on the sale  of an asset this financial year and  earn less than 10% of your income2 from eligible employment. Invest the sale proceeds in super. – claim a portion of the contribution as a tax deduction
– increase your retirement savings
5. Get a super top up from the Government Earn less than $51,0202 pa, of which at least 10% is from employment or a business. Make a personal after-tax super contribution. – qualify for a Government co-contribution of up to $500
– increase your retirement savings
6. Boost your partner’s super and
reduce your tax
Have a spouse who earns less than $13,8002 pa. Make an after-tax super contribution on their behalf. – receive a tax offset of up to $540
– increase your spouse’s retirement savings
7. Convert downsizing your
home sale funds into a super boost
Are an Australian homeowner aged 65 years and older Contribute up to $300,000 as a non-concessional (after-tax) contribution from the sale of your home to your superannuation – pay no tax on investment earnings
– increase your retirement savings

Smart Insurance Strategies

Two insurance strategies that may help you benefit from tax concessions this financial year.

If you… You may want to…  So you can…
1. Buy insurance in super tax-effectively – Are eligible to make salary sacrifice contributions, or
– Are eligible to receive Government co-contributions, or
– >Have a spouse who earns less than
$13,8002 pa, or
– Earn less than 10% of your income2 from eligible employment
– Purchase life and total and permanent disability insurance through a super fund
– Make concessional contributions to your super fund
– Benefit from tax concessions
– Make premiums more affordable
2. Pre-pay income protection premiums and reduce this year’s tax Are employed or self-employed Pre-pay 12 months’ income protection insurance premiums – Claim your tax deduction upfront
– Pay less income tax this financial year

Smart Investment Strategies

Four investment strategies that may help you improve your tax liability this financial year.

If you… You may want to …  So you can …
1. Offset a capital loss against a capital gain Have received capital losses from your investments. Utilise the capital losses against any capital gains. – Manage your tax on investments more efficiently
2. Defer asset sales Are thinking of selling a profitable asset this financial year. Defer the sale until a future financial year. – Manage your cashflow more efficiently
3. Pre-pay investment loan  Have (or are considering establishing) a geared investment portfolio. Pre-pay 12 months’ interest on your investment loan. – Manage your cashflow more efficiently
– Potentially pay less income tax this financial year
4. Make better use of your tax refund Receive a tax refund. Use your refund to:
– Pay off non-deductable debts first
– Pay off your home loan and then borrow to invest
– Fund your daily living expenses and contribute your pre-tax salary into super
– Save on interest
– Invest your refund outside of super
– Boost your super tax effectively

 

 

Some of these strategies are best implemented prior to the end of financial year, speak to a Modoras Planner today on 1300 888 803 or:

Book an appointment! Email:info@modoras.com

1 It’s important to check for CGT implications before cashing out any investments.
Includes assessable income reportable fringe benefits and reportable super contributions. Other eligibility conditions apply. 

These individuals EOFY strategies were published by Modoras Pty Ltd ABN 86068034908 AFS and Credit License No. 233209. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.


For Businesses

Write-off bad debts 

To be a bad debt, you need to have brought the income to account as assessable income, and given up all attempts to recover the debt.  It needs to be written off your debtors’ ledger by 30 June.  If you don’t maintain a debtors’ ledger, a director’s minute confirming the write-off is a good idea.

Trading Stock

Write off any stock that is damaged or obsolete. Complete a stock take (if you are not using the simplified trading stock rules) and remember that stock can be valued at the lower of cost, replacement, or net realisable value. You can use different methods for different stock items.

Review your asset register and scrap any obsolete plant

Check to see if obsolete plant and equipment is sitting on your depreciation schedule.  Rather than depreciating a small amount each year, if the plant has become obsolete, scrap it and write it off before 30 June.  Small Business Entities can choose to pool their assets and claim one deduction for the pool. This means you only have to do one calculation for the pool rather than for each asset.

Repairs, consumables (office stationery etc.)

To claim a deduction for this financial year, consider paying for any required repairs and replenishing consumable supplies  before 30 June.

Pay June quarter employee super contributions

Super contributions are deductible in the year they are paid. The June 2018 quarterly superannuation guarantee payment is due on 28 July.  However, some employers choose to make the payment early by 30 June to bring forward the tax deduction instead of waiting another 12 months.

Don’t forget yourself

Superannuation can be a great way to get tax relief and still build your personal wealth. Your personal or company sponsored contributions need to be received by the fund before 30 June to be deductible.

The sale of your business can often go into your Superannuation. Investing in Superannuation may be a tax-effective way of saving for your retirement. Speak to a trusted advisor who takes a holistic view of your financial situation to develop a plan that may get you to a comfortable retirement.

Capital gains and losses

Neutralise the tax effect of any capital gains you have made during the year by realising any capital losses. These need to be genuine transactions to be effective for tax purposes. It may be possible to contribute assets with unrealised losses to superannuation in order to do this.

If you are considering the sale of investments of which some will result in a capital gain and some in a loss, to minimise capital gains tax implications please seek tax advice prior to sale.

Directors’ fees and bonuses

Declare them before 30 June and providing the company is absolutely committed to them, you are entitled to the deduction even if they have not been paid.  Again, a director’s minute is a good idea.  The directors and employees only need to declare this income in the year of receipt, although they need to be formally notified of their entitlements by 30 June.

Management fees

Where management fees are charged between related entities, make sure that the charges have been raised by 30 June.  Where management charges are made, make sure they are commercially reasonable and documentation is in place to support the transactions.  If any transactions are undertaken with international related parties then the transfer pricing rules need to be considered and the ATO’s documentation expectations will be much greater.  This is an area under increased scrutiny.

Prepayments

Small Business Entities (SBE) with a turnover under $10m can claim an immediate deduction for prepaid expenditure provided the service period relating to the expenditure is less than 12 months and will end by the end of the next financial year. Non SBE taxpayers (Turnover over $10m) can only claim prepaid expenditure that is 1. Less than $1,000; 2 Required by Law; or 3. Paid under a contract of service such as salary and wages.

Deferring income

If you receive payments in advance of the goods and services being provided and you account for income on the accruals basis then there might be an opportunity to defer the inclusion of this income until a later year.

Deemed Dividends – Division 7A Loans

Minimum repayments need to be made by 30 June under the Division 7A Loan Agreement to avoid triggering a deemed dividend.

To reduce the interest payable, consider declaring dividend early in the financial year.

Purchase of depreciating assets – under $20,000

SBE taxpayers (turnover under $10m) can claim an immediate deduction for the purchase of a depreciating assets (such as plant, furniture, equipment or motor vehicle) that cost less than $20,000. The asset must be installed ready for use by 30 June to be deductible this year.

As always these tax opportunities should only be considered where they make commercial sense. Incurring expenses simply to claim a tax deduction often will not make sense from a commercial or cash flow point of view. If you require any further information or require specific advice regarding tax planning for your business please contact us on 1300 888 803 or:

Book an appointment! Email:info@modoras.com

These EOFY strategies were published by Modoras Accounting (QLD) Pty Ltd ABN 81 601 145 215. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.