Are you ready for 30 June 2020
The 2020 end of financial year (EOFY) is fast approaching and you should be considering the available options that may just boost your business or your personal financial position. So, as thoughts turn to getting your house in order before the EOFY, what tips should you be aware of?
Take advantage of the instant asset write-off
From 12 March 2020 until 30 June 2020, the instant asset write-off threshold is $150,000 (up from $30,000) for businesses with an aggregated turnover of less than $500 million. This means you can purchase an asset of up to $150,000 until 30 June and claim a deduction for the full amount on your tax return, rather than partially writing off the asset based on its depreciation rate.
Please note that there is a limit of $57,581 on purchasing a car. The ATO definition of a car is any motor-powered road vehicle (including a 4-wheel drive vehicle) that is designed to carry a load of less than 1 tonne and fewer than 9 passengers.
From 1 January 2021, the small business tax write-off threshold will drop back down to $1,000 and only apply to businesses with an aggregated turnover of less than $10 million.
Prepay your 2020-21 expenses
If you’re expecting to have a higher income in 2019-20 than 2020-21, you may want to consider prepaying some of your expenses – such as insurance, business premises rent, subscriptions or memberships – this financial year. You can deduct up to 12 months of the following year’s expenses in the current tax year.
Make voluntary super contributions
Pre-tax super contributions, known as concessional super contributions, are taxed at a rate of 15%. This is lower than the lowest income tax rate of 19% and company tax rate of 27.5%, and you can claim a deduction on contributions.
The concessional super contributions cap is $25,000 for individuals. If you plan to claim a deduction for your concessional contributions, you’ll need to provide a ‘Notice of intent to claim or vary a deduction for personal super contributions’ form to your super fund.
Depending on your situation, you may be able to defer some income to reduce your taxable income for the 2019-20 financial year. For example, if you delay sending an invoice until 1 July 2020, the invoice amount will count towards your taxable income for next financial year rather than this year.
Review your debtors
You can claim a tax deduction on unrecoverable debts regardless of the year in which you invoiced them, as long as you can show that the debt was initially included as income and has been written off by June 30 2020. Document your decision to write off the debt, as this can be used as evidence that the debt was written off before EOFY.
Write off damaged or obsolete stock
If your business holds stock, consider reviewing your stock valuation and writing off any stock that’s damaged or obsolete. Complete a stocktake, and keep in mind that stock can be valued at either cost price or net realisable value (its expected selling price), whichever is lower.
Let’s have a chat
Of course, tread carefully and don’t let tax drive your business and/or investment decisions. You should determine whether these strategies will suit your circumstances. If you have any questions, let’s set up a time to discuss and agree on your pre-30 June action plan. Email me at firstname.lastname@example.org or call me on 0411 034 275.
The information presented is general in nature and not to be used, relied or acted upon without seeking professional advice to ensure that the information appropriate for your individual circumstances. National Taxation accepts no liability for any errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice. www.nationaltaxation.com.au. ABN 63 665 545 130.