Category Archives for "tax deductions"

End of Financial Year Guide for Small Business

End of Financial Year Guide for Small Business

To take advantage of all the deductions and tax minimisation strategies available to your business you need a clean set of up to date accounts

We would like to draw your attention to some of the key items that need to be addressed in order for your accountant to minimise your tax.

Accounts to Reconcile

  • Bank & Credit Card Accounts

Reconcile statement balance to 30 June.

  • Clearing Accounts

Clearing accounts should have a zero balance at the EOFY.

  • Petty Cash

Petty cash needs to be counted and reconciled to balance as at 30 June. Ensure all receipts have been entered into your accounting software and reconciled to a petty cash tin held by the business.

  • Undeposited Funds

This account should reflect the amounts un-banked as at 30 June.

  • Suspense Accounts

This should only be used as a holding account until you have certainty where to allocate the transaction. Ensure this is cleared out as at 30 June.

  • PAYG Withholding

The balance reflected in this account as at 30 June should be the amount left to remit to the ATO.  This usually would be 3 months (last quarter Apr – Jun).

  • Salaries & Wages

Prior to producing payment summaries to staff you need to ensure that the gross wages in your payroll report agrees to the balance in your profit & loss for the year and also agrees to the total sum of payment summaries produced.

  • Superannuation Payable

The balance reflected in this account as at 30 June should be the amount left to remit to the Super funds.  This usually would be 3 months (last quarter Apr – Jun).

  • GST Liability

The balance reflected in this account as at 30 June should be the amount that is payable/refund to the ATO.  This usually would be 3 months (last quarter Apr – Jun) if on quarterly BAS.  It’s always a worthwhile exercise to prepare a spreadsheet of what was lodged with the ATO and what your accounting system shows.  This will pickup any differences throughout the year that haven’t been picked up.

  • Accounts Payable

Make sure your Accounts Payable Summary report agrees to your Balance Sheet Accounts Payable or Creditors balance at 30 June.

  • Accounts Receivable

Make sure your Accounts Receivable Summary report agrees to your Balance Sheet Accounts Receivable or Debtors balance at 30 June.

  • Inter-company Loans

If you operate multiple entities and they borrow and loan money to each other you want to ensure that these loan amounts are reflected in both company accounting files. One company will have a DR balance and the other company should have the same amount but a CR balance.

  • Inventory

If your business tracks and stocks inventory you will need to run an inventory valuation report as at 30 June.  Make sure the balance on this report agrees to your Balance Sheet Inventory or Stock on Hand figure balance.

Things to Consider

  • Bad Debts

If you are on an accrual basis, you will be paying tax on the invoices you issue for the financial year, regardless if paid or not. Review your debtors list prior to 30 June and write off those invoices you know won’t be paid to avoid paying tax this year on money you will not likely ever receive.

  • Deferring Income

If cash-flow permits you may want to reduce income for the year by deferring some of your June invoices until July.

  • Accrue Expenses

Accrue expenses before 30 June, these including stationary, office supplies, repairs, computer supplies, etc.

  • Employee Superannuation Contributions

If cash-flow permits ensure all employee and employer superannuation contributions for your June quarter superannuation owing are made prior to 30 June to secure a tax deduction as superannuation is only deductible when paid.

  • Prepayment of expenses  (Small Business only)

If your cash flow allows, you should consider making advance payments for expenses over the next 12 months (e.g. Rent, insurance, advertising). If you are eligible for the small business concessions, you can claim an immediate deduction for such prepayments – obtain advice from your accountant

  • Capital Purchases for Assets less than $20,000

If your business is a small business entity (Proposed at turnover of less than $10m) depreciating assets valued at less than $20,000 are immediately deductible provided they are acquired and installed ready for use on before 30 June. – If cash-flow permits you may want to upgrade your computer equipment for an instant write-off

The balance of the general small business pool is also immediately deducted if the balance is less than $20,000 at 30 June 2017.

  • Repay Director Loans

Repay director loans (i.e. amounts borrowed from the company) to the extent possible prior to 30 June to minimise any Division 7A loan balances outstanding and thereby minimise any dividends required to be paid as income to shareholders – obtain advice from your accountant

  • Investment Property Deductions

If you own a rental property, consider arranging a depreciation report to allow you to maximise the depreciation and building write off deductions for your investment property.

  • Accounting Software Upgrade

Why not use the start of a new financial year to evaluate your accounting software.

Questions to ask yourself:

1. Is the system giving me the information I need to operate my business most effectively
2. Am I desk bound to my software
3. Would I gain benefits from having a cloud mobile application like QuickBooks Online
4. Has my business outgrown my current accounting system and need to look at something like JCurve
5. Can my Accounts Payable processes be automated using software like Receipt Bank
6. Do I need to make an appointment with a cloud accounting adviser like Contact

Please note the following information is factual only and does not constitute advice or recommendation.

Should you have any questions regarding the above please do not hesitate to Contact our office.

Phone: 1300 884 722




Tax deduction secrets that women need to know

by Bianca Hartge-Hazelman

Tax isn’t sexy, but talk shopping and tax deductions, and then you’ve got something most women want.

Handbags, gloves, makeup, clothes, sunglasses, sunscreen and hats may all be tax deductible but the success really depends on meeting the ATO’s three golden rules:

  • You must’ve spent the money yourself

  • The expense must be related to your work and;

  • You need to have a record to prove it.

Assistant Commissioner at the Australian Tax Office Graham Whyte told Financy the purchase of handbags used to carry work items, such as papers and electronic devices, could be tax deductible. This is despite earlier reports which suggested that this couldn’t be done.

But he added that a wallet, purse, and business suits are unlikely to be successfully claimed.

A wallet or business suit will usually be considered private, even though in many professional circumstances it may be an expected component of work,” said Mr Whyte.

Whitehead Dingley & Betar partner and chartered accountant Kate Hills says the most common items that women claim tax deductions for are sunglasses, driving gloves, sunscreen and bags.

Flight attendants 

Clothing is not usually tax deductible because it’s a private expense in that we all need clothes. However there have been successful claims made for extraordinary items.

The courts have consistently looked for ‘additional features’ which would take these purchases out of the category of private expenditure,” said Ms Hills.

For example, in the Mansfield Case, the taxpayer, who was a flight attendant, purchased conventional shoes for work.

These shoes needed to be a half-size too big for ordinary use due to the cabin pressure of the aircraft.

They were also subject to regular scuffing while working on the aircraft.

The courts allowed a tax deduction due to ‘additional features’ which took the purchase out of the category of private expenditure.”

Sales reps, construction work and couriers

Protective clothing can also be tax deductible but only if the items protect you from the risk of ‘illness or injury’ while at work.

For example, a woman working as a courier or in a sales role, who spends most of her time in the car visiting clients, could claim the purchase of driving gloves, sunglasses and sunscreen to protect her from the sun whilst in the car,” said Ms Hills. 

This could also apply to a women who works for a construction company as a project manager and spends are large portion of her time exposed to the sun whilst visiting construction sites.

In addition to the above purchases, she may also have expenditure on a sun hat.”

Make up and the arts

Makeup is much easier for performing artist to claim, such as actors, musicians or presenters on stage, film and television. But for everyone else, it’s a lot tougher.

This is because makeup and other grooming items are private everyday expenses, and not necessarily needed at work.

The courts have been known to even deny the claims of flight attendants, despite the need to look presentable, and hairdressers, where claims for personal hair expenses have been made.