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.For businesses to maximise their cash position, they should consider the following tax planning opportunities before 30 June:
- Declare dividends and trust distributions by 30 June:
- Declarations need to be documented in dividend/distribution resolutions
- It is highly recommended that resolutions are signed by 30 June
- Prepay expenses before the end of the year:
- If aggregated turnover is less than $50m, you can claim 100% deduction in the year an expense is paid
- Maximise superannuation contributions:
- Super is only deductible if paid by 30 June
- Personal contributions can only be claimed if received by super fund by 30 June and notice sent to super fund before the earlier of your tax return’s lodgement date or lodgement due date
- Annual concessional contribution caps are $27,500
- Review whether you are eligible to utilise carry-forward of unused concessional contribution caps from prior years to further maximise your contributions
- 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
- 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 Division 7A loans can be restructured
- 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 if any losses can be used to reduce current year gains, otherwise these will be carried forward until they can be offset against gains in either the same year or a future year
- Only the contract date rather than the settlement date needs to be before 30 June for capital gains tax purposes
- Consider whether distribution minutes can be prepared in a way to utilise group losses
- Review 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 the rate of depreciation
- Repay Division 7A loans:
- Cash repayments can reduce the requirement for dividends to be declared
- Consider Section 100A compliance for Trusts:
- Keep a record of expenditure incurred on behalf of adult children (after they turned 18) – Including university fees and motor vehicle costs; excluding domestic expenses relating to the family home
- Best practice would be to make these payments from the trust’s bank account
- Review tax rate applying to companies:
- Base rate companies pay tax at 25% while all others pay tax at 30%
- Consider the 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)
- Review for access to refundable franking credits:
- Review for opportunities ahead of 30 June 2023 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 and document your 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 options to reduce or defer tax payments
- Plan the cash flow for instalments of tax, and the tax due on lodgements of tax returns
- Identify opportunities to vary tax instalments and improve cash flow
- Implement above tax planning and other savings.
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.