Are you across all of the changes and how they will affect your business before this financial year ends? As an owner of an SME, the onus is on you to make sure that your business is prepared.
Here are my top tips to ensure you end the year on a positive note, rather than with a hefty tax bill:
What do you need to remember before the changes come into effect from 1 July?
Reduction of the corporate tax rate: Recently announced in the Federal Budget was the commitment to the progressive reduction of the corporate tax rate. The 10-year plan is effective from 1 July and will reduce the tax rate for businesses with an annual turnover of less than $10 million to 27.5 per cent. This will incrementally decrease until 2027, when the tax rate becomes 25 per cent.
Superannuation balance caps: For those business owners approaching pension phase, there will be a balance cap for superannuation accounts that have more than $1.6 million. If your super exceeds the cap, it is important to ensure that the excess is either removed from the account or transferred into an accumulation phase, where earnings will be taxed at 15 per cent.
PAYG payment summaries: Ensure all payment summaries for your employees are made by 14 July. According to the Australian Taxation Office, the first tax refunds will be issued from 18 July.
What should you take advantage of?
Deductions and government incentives
Prior to June 30, business owners need to undertake a thorough assessment of their business structure. Accounts receivables should be reviewed and any bad debts need to be written off before June 30.
To the same point, business and plant equipment should be reviewed and replaced where appropriate. The immediate write-off of concession on depreciable assets with the value of less than $20,000 has been extended for another twelve months to 30 June 2018. From July 1, businesses with an accumulated turnover of less than $10 million will also be able to access this concession. To receive an outright deduction, any new assets purchased must be installed and functioning in your business before June 30.
Pre-committing to pay employee bonuses
If you plan to distribute bonuses to your employees this fiscal year, you may want to sign off on these before June 30 in order to document the commitment and to claim a tax deduction.
Changes to superannuation contributions caps
From July 1, the concessional contributions cap will be reduced to $25,000 from $30,000 or $35,000 for those aged over 49. For those who salary sacrifice, it is ideal to take advantage of these concessions before the lower thresholds come into effect, but be sure to revise this in the new fiscal year to ensure you stay within the threshold.
There have also been changes with regards to non-concessional caps. With the abolishment of the $500,000 lifetime non-concessional cap, an annual $100,000 non-concessional cap will be introduced, , allowing a total of $300,000 in contributions over a three-year period, provided the super balance is less than $1.6 million.
Pre June 30 is a good time to review your business performance to optimise tax and forecast future tax payments. To ensure that your business is set for success, the most effective taxation planning is to optimise your business structure, which should not be restricted to June, rather it should be an ongoing conversation throughout the year with your accountant or adviser.
About the author
Jamie Bishop is a Partner, Business Services with McLean Delmo Bentleys, a member of the Bentleys network of independent accounting firms in Australia. He has over 12 years’ experience in public practice and has been with the firm since 1999.