FAB’s Top 10 Business Tax Tips for 2016

Want to position yourself in the best possible way for your tax return in 2016? Get your business tax ready before June 30 with our top 10 business tax tips:

1. Check your super contributions

• If your employee super contributions are paid and cleared by the bank by 30 June you can claim a tax deduction in 2016.
• Ensure your accounting software is set to apply the correct super rate of 9.5% for the 2016 year.
• If you are fully or partly self-employed, think about making a concessional contribution, as this can be an easy way to cut your tax bill. Many people forget this simple strategy for reducing tax and boosting their retirement savings.
• For the 2015/2016 year, an individual who is under 50 has an annual concessional contributions cap of $30,000, while an individual aged 50 years or over has a concessional cap of $35,000.

2. Write off bad debts

• Bad debts must be written off through your accounting software before 30 June.
• In order to qualify for a tax deduction, the debt must be bad, not merely doubtful. This bad debt must also have been included in assessable income.
• If not processed through your accounting software, written evidence must be put in place before the end of the financial year. This evidence can take the form of minutes of a meeting before the end of the year.

3. Use your instant asset write off – for small businesses

• An instant write off is available for any business assets you purchase at a cost of less than $20,000, GST included.
• Your purchase of an eligible asset by 30 June 2016 will give rise to a full $20,000 deduction in the 2016 year. This threshold will revert to $1,000 from 1 July 2017.
• Small businesses qualify for the write off if their business has an annual turnover of less than $2 million (proposed to increase to $10m from 1 July 2016)

4. Check your stock and asset listing

• Completing a stock-take before the end of the financial year helps ensure your 2016 profit is accurately recorded.
• Obsolete stock can be scrapped, reducing your tax liability by reducing your profit.
• This is also an opportunity to review your latest fixed asset depreciation schedule. Writing off equipment that is no longer in use will help increase your tax deductions.

5. Record your motor vehicle expenses

• Ensure all logbooks and travel diaries related to business travel are up to date to substantiate any related expense deductions.
• An odometer reading should be taken on 30 June each year to calculate kilometres travelled. Maintaining your logbook will help maximise the deduction you can claim. If your logbook is more than 5 years old you will need a new one for a continuous 12-week period.
• Non-logbook methods of calculating motor vehicle expenses (12% of the value of the car & 33% of the operating costs) were removed from 1 July 2015. The only option, if you do not have a logbook, is to claim a work related deduction based on kilometres travelled up to a maximum of 5,000 km’s at $0.66/km.

6. Super Stream

• Small employers (19 or fewer employees) must meet the SuperStream standard by 30 June 2016.
• SuperStream is the standardisation of how employers make super contributions on behalf of their employees. It involves employers sending all super payments and employee information electronically in a standard format and using it is mandatory.
• You can select how your business becomes SuperStream ready. Options include using a payroll system that meets the SuperStream standard, a super fund’s online system, a messaging portal or a super clearing house like the ATO’s Small Business Super Clearing House (SBSCH).

7. Get set for a 2.4% wage increase

• The Fair Work Commission has announced a 2.4% increase to minimum wages. The increase will apply from the first full pay period starting on or after 1 July 2016.
• The 2.4% increase only applies to employees that get their pay rates from:
  • the national minimum wage
  • a modern award or
  • a registered agreement (in some cases).

8. Employee bonuses

• The end of the financial year is a good time to sign off on any bonuses for employees.
• The employees should be informed in writing of bonuses, but they do not have to be paid before June 30. The important thing is a definite commitment has been made and there is a record of the commitment.

9. Defer tax

• Pre-pay expenses for the next 12 months. Small business can generally obtain a full deduction in the year of the payment, so long as the prepayment is not for more than 12 months and finishes before the end of the following income year.
• Prepay interest for the next 12 months on an investment loan and do it before 30 June. This will allow that entire deduction to be claimed this financial year.
• Prepay next year’s income protection insurance premiums (where held personally) before 30 June to bring the deduction into this financial year.
• If looking to sell assets with unrealised capital gains, consider delaying to next financial year if you will be taxed on a lower marginal rate.
• Bring forward deductible expenses such as repairs and maintenance into the current year or prepaying monthly costs such as rent, electricity, wages and utilities.
• If your business returns income on a cash basis, you will be assessed on income as it is received. Businesses that return income on a accrual basis are generally assessed on income as it is derived or invoiced. If you receive income or issue invoices in July 2016 rather than June 2016, you will defer tax paid on this by 12 months.

10. Develop a plan

• The end of financial year is the ideal time to plan for the future.
• Using online tools to organise your invoices, receipts and other relevant paperwork could not only save you time before June 30, it could also have longer term benefits for your business’ bottom line and tax planning.
• Develop realistic profit and loss forecasts for the next 12 months
• Review your insurance cover – are you protected against all the risks facing your business?

• If you’re in business with other people, consider developing a business succession plan.
• A buy/sell agreement, for example, can help ensure a smooth transition of ownership in the future.

So there you have it – our Top 10 Business Tax Tips for 2016. To set yourself up for success this tax season, book in with FAB by calling 1300 541 777 or contacting us online today.