The decisions you make throughout the whole year can affect the amount of tax you pay on net income earned by your business for the financial year.
Below is an outline of a few things you should consider before 30 June 2011.
- There are four possible methods of claiming motor vehicle expenses used in a business where there is some private use component – log book method, 12% of cost method, one-third of actual expenses method or cents per kilometre method.
- You need to select which method will give you the maximum tax deduction.
- Extent of substantiation record keeping varies depending on method chosen to claim.
- If the log book method is chosen, you need to maintain a log book for a 12 week period and prepare a new one after every 5 years or if and when travel patterns have substantially changed.
- You do not have to keep a new log book each time you changeover your business vehicle.
- Ensure your log book is completed properly for the 12 week period.
- You should keep all your relevant invoices/receipts for your motor vehicle purchase or sale and expenses incurred including any finance contracts, if vehicle purchase was financed.
Timing of Expenses
Expenses will generally be deductible if incurred by 30 June 2011. A few points to remember are:
- There must be a presently existing liability at 30 June for the expense to be “incurred”;
- Provisions are generally not deductible;
- Some accruals are not deductible;
- Most prepayments are not deductible.
Donate gifts to tax deductible charities on or before 30 June 2011.
- Check that payment is to an ATO endorsed “deductible gift recipient” (DGR). This information is publicly available on www.abn.business.gov.au by searching for the organisation’s name.
Superannuation issues to consider and seek appropriate qualified advice are as follows:
- The maximum concessional (tax deductible) contributions for superannuation for 2010/11 are as follows:
- Age over 50 $50,000
- Age under $25,000
- Before making any further contributions prior to the end of the financial year, make sure that you take into account contributions that have already been made, and ensure that contributions made for the year do not exceed the concessional or non-concessional contribution limits.
- Employee superannuation guarantee contributions required – 9% of employee’s gross wage by 28 July 2011, however to claim the tax deduction this financial year the payment needs to be made prior to 30 June 2011.
- If over 60 years of age, consider the use of a transition to retirement income stream strategy while still working, as pension income streams are tax-free but employer-sponsored or member concessional superannuation contributions are tax deductible.
- Ensure that at least the minimum pension payments have been made for those in pension phase
- Scrap all obsolete plant and equipment by 30 June 2011.
- Use effective life rates issued by ATO or self-assessed by taxpayer.
- Consider reassessment of effective life if plant has excessive use etc.
- Balancing adjustment on disposal – excess is assessable/ deficit is deductible.
- Consider delaying disposal of plant items for a profit until after 30 June 2011.
- Consider bringing forward disposal of plant items for a loss to before 1 July 2011.
- For cars acquired use 8 years effective life.
- Items of plant costing less than $1,000 – option to allocate assets to low value pool:
- Depreciated at diminishing rate value of 37.5%.
- First year rate 18.7% diminishing value.
- Once you have setup a low value pool, all new low value assets acquired in subsequent years must be allocated to the low value pool.
Call us on 07 3833 3999 if you have any tax related queries.