Business owners often find themselves drowning in paperwork and tax time just adds to the burden. There’s always so much to consider including what you’re eligible to claim and ways to maximise your business’ end of year profits. In light of Project Wickenby’s recent crackdown on tax evasion and fraud, leading Chartered Accountancy firm, Nexia Court & Co is warning businesses with offshore accounts or assets to be extremely vigilant. Companies unsure if any of its business activities may be considered illegitimate should seek advice from the Australian Tax Office (ATO) immediately.
Nexia Court & Co has compiled some essential top tips to help businesses maximise tax returns and avoid being penalised:
1. Visit the Austraian Tax Office (ATO) website for the latest tips and advice most relevant to your business: There is a wealth of information on the ATO website. Research the latest government levies as well as up-to-date advice on what you may be eligible to claim as a deduction.
2. Pay superannuation contributions before the 30th to ensure a deduction: Employers must check they have made sufficient superannuation contributions (9%) for all employees on a quarterly basis throughout the financial year to avoid incurring a penalty under the Superannuation Guarantee Charge (SGC).
3. Scrap obsolete plant and machinery: The best way to get a write-off deduction for obsolete objects is to review your asset register and take the necessary action before 30 June. The asset register is a list you should be keeping of all company equipment, including furnishings and all items bought, sold or disposed of during the year.
4. Get capital gains tax concessions: This concession allows you to reduce the capital gain arising from a business asset (an active asset) by 50%. To qualify for the 50% active asset reduction, you need to satisfy the basic conditions that apply to all the capital gains tax (CGT) small business concessions. You can apply all the concessions you are entitled to (rules apply) until the capital gain is reduced to nil. If unsure, visit the ATO website for more information.
5. Value trading stock at the lower cost – market value or replacement value: If you are required to include a value in your accounts of stock on hand as at 30 June, you are able to select the most advantageous valuation method, which could allow you to reduce your trading income.
6. Write off bad debts and claim back the GST credits where the debt has been outstanding for more than 12 months: To do this, the debt must have been brought to account as assessable income and you must have physically written off the debt prior to the end of the year. Bad debts cannot be claimed by taxpayers who recognise income on a cash basis.
7. Ensure private company loans that extend beyond the end of the income year are properly documented: If they are not set up correctly they may be deemed by the Tax Office as unfranked dividends paid to the shareholder by the company. If this is the case, you could be paying more tax than necessary.
8. Review PAYG installment obligations: Consider varying the instalment for the June 2011 quarter where your estimate of income tax payable for the year is less than the instalments calculated by the ATO.
9. Claim a deduction for Director’ fees and bonuses: If you intend to pay Directors’ fees or bonuses to your team, you may be able to claim the deduction in this financial year. Let the people you’re paying know the fee or bonus will be paid and document proof that you advised them prior to the end of the tax year. The payment does not have to be made this financial year to claim the deduction. If the payment is not made until July, the person will not have to declare the income until the next financial year.