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Tax Time Tips

27
Feb

Tax Time Tips

Wednesday, February 27, 2019

Technology is (or was) supposed to save us time. However in most cases it seems technology and time are not compatible bed fellows.

More and more, I'm finding business owners are struggling with their finances and tax obligations.

And while the end of financial year is probably still seems like a good time to take stock, for the vast majority of businesses it’s a scramble to gather receipts and Google what deductions can be claimed as the July 1 deadline approaches.

To help take some of the pressure off, here's just a few tips to help you get your affairs in order

Claim Your Deductions

It's common sense stuff, but you'd be surprised at what many small businesses don't claim when they're legally entitled. Whether it's rent, repairs or accounting advice it has to be related to earning your income AND you'll need to be able to show proof. Just because you feel you're entitled to standard claims doesn't mean you can test the ATO. Ask yourself whether you can justify this expense?

Take advantage of the $20,000 instant asset write-off

Despite ongoing calls to make the $20,000 instant asset write-off a permanent fixture, the federal government continues to string SMEs along, extending the scheme for just 12 months at a time.

Regardless, it’s still around this year until June 30 so if you're small business owner you can still claim up to $20,000 worth of assets for their business up until that point. In short, if you purchase an asset related directly to your business you can immediately claim a deduction for the business portion of that asset up to $20,000. If you're unsure, check with your accountant or financial advisor.

Know the ATO’s 'Hitlist'

Remember when teachers would let you know there was a test coming, so it would be advisable to brush up on specific topics? Well the ATO does pretty much the same thing very year, letting Australians know the things it’s keeping an eye on when it comes to tax time.

Keep an ear to the ground, know what area's are being targeted.

Company tax rate changes

From the 2017–18 income year, companies that are base rate entities must apply the lower 27.5% company tax rate.

A base rate entity is a company that both:

  • has an aggregated turnover less than the aggregated turnover threshold – which is $25 million for the 2017–18 income year
  • 80% or less of their assessable income is base rate entity passive income – this replaces the requirement to be carrying on a business.

Base rate entity passive income is:

  • corporate distributions and franking credits on these distributions
  • royalties and rent
  • interest income (some exceptions apply)
  • gains on qualifying securities
  • a net capital gain
  • an amount included in the assessable income of a partner in a partnership or a beneficiary of a trust, to the extent it is traceable (either directly or indirectly) to an amount that is otherwise base rate entity passive income.

Get your super in on time

Remember if small business owners want to claim a tax deduction for super payments they make for employees, the super has to be done and paid before June 30, otherwise you can wave goodbye to the opportunity.

Keep watertight records

More of a reminder - it’s never too late to start getting your records together for next year.

Generally, you need to keep these for five years from when you lodge your tax return in case we ask you to substantiate your claims.

Whether you're an employer or employee some of the records you'll need to keep include:

  • payment summaries from payers, including your employer and the Department of Human Services
  • statements from your bank and other financial institution showing the interest you've earned
  • dividend statements from companies
  • summaries from managed investment funds
  • receipts or invoices for equipment or asset purchases and sales
  • receipts or invoices for expense claims and repairs
  • contracts
  • tenant and rental records.

Individuals: If your total claim for work-related expenses is more than $300, you must have written evidence to prove your claims.

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