It’s that time of year again…
At the heart of every business success is good planning. COVID-19 smacked every business and individual in the face. The speed at which change was forced upon our world has been nothing short of a shocking nightmare. Even the best of planners couldn’t plan for this.
One thing we do know is that EOFY is around the corner and that we can plan for.
In this edition we look at some of the things business owners need to be addressing with their Bookkeeper or Accountant before 30 June 2020.
Over the next week or so we will be looking at what things you can be doing to prepare for when JobKeeper and Cashflow Stimulus stop – yes that includes budgeting and forecasting (2 of my favourite things).
Please always know that we are only a phone call, email or even zoom meeting away (appointment link below) should you need to talk through some scenarios with us.
1. Pay Super Contributions
For the purpose of claiming a tax deduction your superannuation payments for the 2019-2020 year must be received by the super fund on or before 30 June 2020. If you are using a clearing house that needs to be done by 23 June to allow enough time for funds to be disbursed to the relevant super funds. Always remember that the maximum super deduction is $25,000 per person.
2. Write off Bad Debts
While it never seems like good news to write off “bad debts” it’s one way you can offset your taxable income especially if you’re still chasing invoices from last financial year. So review your current debtors list and if there are any of those invoices that you believe won’t pay by 30th June then write these off. You must be able to show that you have attempted to collect these invoices.
3. Stock take Count
In addition to meeting your tax obligations, doing a stocktake at the end of the financial year means you gain a better understanding of your stock levels and whether you should write off any damaged or obsolete items. You may also decided that you want turn that stock into quick cash and sell them at a reduced price. The purpose of stock take is to help you make legitimate tax deductions when they are warranted.
4. Take Advantage of the Instant Asset Write-Off
The instant asset write-off scheme is one of the best tax breaks for businesses to claim an immediate tax deduction. From 12 March 2020 the government increased the instant asset write-off from $30,000 to $150,000 per asset. While this scheme will reduce the tax your business has to pay, it is not a rebate. Your cashflow will still have to be able to support any outright purchases.
To claim the deduction the asset must be used or installed by 30 June 2020. Note, that the immediate deduction for a car cannot exceed the cost limit of $57,581.
5. Claim ALL Deductions
Business owners sometimes purchase work related expenses on personal credit cards or cash. Now is the time to sort through your personal accounts and find those transactions. Proof of purchase will be required to support the claim. Do not assume because you paid for it personally that you cannot claim it through the business.
6. Take Up Any Deferred Revenue
Deferred revenue is common with subscription based businesses that are invoiced 12 months in advance. In some cases you may have invoiced for part of a job that hasn’t been completed or delivered. In these scenarios you should look to adjust your revenue by the income amount that hasn’t been earned yet to offset your taxable income.
7. Prepay Expenses
Whilst most businesses have been impacted by COVID-19 they may not have surplus cash to prepay any expenses. The most typical ones that come to mind are rent, insurances and professional fees. Some companies like to prepay to get the tax deduction upfront. Prepayment rules apply to small business entities so you should therefore always check with your Accountant on your eligibility.
We welcome your questions and queries and would encourage that you schedule a time with us to review your accounts.
Secondly if your Tax Accountant hasn’t contacted you for some tax planning advice, we encourage you to contact them.
No one wants to pay more tax than they need to :)