Chance for small business to minimise tax
IT'S around now that people turn their attention to ways to minimise their tax.
Employees have limited opportunities at this time of year. Our tax system encourages debt, as I have said before.
And it is too late to negatively gear property or shares in time to help in 2014.
Employees then, are pretty much restricted to purchasing equipment they require for work costing less than $1000, pre-paying fees for a course that is work-related or asking the boss to maximise super contributions made on their behalf.
If taking the last option, be careful not to exceed $25,000 as the penalties can be pretty severe.
The good news is for small businesses that have an aggregated turnover of less than $2 million.
The knife-wielding Abbott government has quite remarkably left alone the instant write-off thresholds introduced by Labor last year.
You can choose to write off depreciating assets costing $6500 or less
You can immediately write off the first $5000 in the cost of a business vehicle plus 15% of the remainder of its cost.
It should be obvious that if you are in a position to take advantage of these concessions, you should do so now.
It might be especially beneficial this year as there seems to be a plethora of discount sales among equipment suppliers and motor dealers right now.
If you are borrowing, chattel mortgages are the way to go as you can collect a refund of your Input Tax Credit in July to add to the accelerated depreciation reducing your taxable income.
If you can handle it, pay 13 months interest in advance and that will come off your taxable income too.
Not a bad leg-up for buying something you need!
Another concession Labor gifted business applies equally to big and small companies.
If a company makes a loss in 2014 and has paid tax on profits made in the prior two years, the 2014 losses can be written back.
The total offset available is $1 million, which if claimed in full could conceivably lead to a tax refund of $300,000, but the very complex accounting involved must be done correctly to avoid inbuilt traps.
Most of the other advisories around are generic and apply from year to year.
Reducing stock, streaming invoices both in and out, pre-paying leases, rent, interest, insurance and other regular commitments 13 months ahead.
Corporate Accountants has released our detailed End of Year Tax Tips to clients.
If you would like to upload a copy send me an email.