2021 EOFY / Tax Planning Checklist

By Chris Smith

A handy checklist for small business owners who want to maximise their business’s cash position.

June 30 is fast approaching and we know this can be a stressful time for many small business owners.  Our EOFY / Tax Planning checklist can assist, with a reminder of the key actions that business owners should consider as we approach the end of the financial year.

  • Prepay expenses before the end of the year:
    • If aggregated turnover is < $10m, you can claim 100% deduction in the year an expense is paid
  • Bring forward the purchase of plant and equipment:
    • Equipment installed and ready for use by 30 June 2021 will be fully tax-deductible in the current year
    • General Asset Pool will be deducted in full this year
    • Choice can be made for assets not held in General Asset Pool as to whether full deduction is allowable or not
  • Utilise Loss Carry-Back rules:
    • Consider if this further encourages immediate write off of assets
    • Review impact on franking account, and whether adequate franking credits exist to pay dividends (including for remuneration purposes, and Div 7A loan management)
    • Consider whether appropriate to change shareholder remuneration from dividend to a deductible director expense
  • Maximise your tax-deductible debt:
    • Loans for private purposes are not tax-deductible
    • Review whether refinance options may be available to increase the split of deductible vs non-deductible debt
    • Consider whether Div 7A loans can be restructured
    • Investigate whether restructures to repayments on loans can be made, as new rules limit the deductions available against vacant land
  • Maximise superannuation contributions:
    • Super is only deductible if paid by 30 June
    • Annual concessional contribution caps are $25k
    • Review whether you are eligible to utilise carry-forward of unused concessional contribution caps from prior years to further maximise your contributions
    • Salary earners can make concessional member contributions as the previous restriction (10% rule) no longer applies
  • Write off bad debts:
    • If debtors are not recoverable, and all action has been taken to resolve, then write off the bad debt before 30 June to bring to account the expense
    • Ensure GST is adjusted
  • Write off slow-moving or obsolete stock:
    • Review your stock holding
    • If the market value is lower than the cost of the stock, a deduction can be realised for the difference
  • Utilise unrealised capital losses:
    • Ensure you take advantage of capital losses within your group
    • Consider whether distribution minutes can be prepared in a way to utilise group losses
  • Check depreciation rates on plant and equipment:
    • Review depreciation schedule for any scrapped plant and equipment that can be written off
    • Review the effective lives of equipment and consider whether appropriate to increase rate of depreciation
  • Repayment of Div 7A loans:
    • Cash repayments can reduce the requirement for dividends to be declared
  • Plan for the change in company tax rates:
    • Base rate companies pay tax 26% while all others pay tax at 30%
    • Planning for rate change in FY 2022 to 25% – consider impact of timing on dividends and the tax credit vs top up tax payable
    • Review any planning that could occur to achieve the desired tax rate (may be lower to reduce tax, may be higher to maximise franking credits on dividends)
  • Check your access to refundable franking credits:
    • Review for opportunities ahead of 30 June 2021 to access any refundable franking credits
    • Consider whether any loss entities could result in a flow of highly franked income resulting in a refund
  • Claim eligible Research & Development activities:
    • When engaged in R&D activities, clearly document the activities and costs relating to those activities to take advantage of R&D Tax Offsets
  • Plan for your tax position prior to 30 June:
    • Understand your options to reduce or defer tax payments
    • Plan the cashflow for instalments of tax, and the tax due on lodgements of tax returns
    • Identify opportunities to vary tax instalments and improve cashflow
    • Implement above tax planning and other savings

 

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If you would like to discuss how you can better manage your business’s tax affairs and potentially improve your business’s cash position, please contact our office on (08) 6212 7200 to speak to one of our qualified advisors.